Trends in State-Local Relations

The 10th Amendment to the U.S. Constitution reserves powers to states in three broad spheres—a sphere most commonly controlled by local governments, a sphere controlled by state governments, and a shared state and local government sphere. Each state historically followed the English Common Law Ultra Vires Rule, and the state legislature exercised plenary powers over its political subdivisions.

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About the Author

Joseph F. Zimmerman is a professor of political science at Rockefeller College of the State University of New York at Albany. He is the author of more than seventy books and numerous articles.

Local governments in many states in the 19th century resented the state legislature’s enactment of “ripper laws,” changing the structure and/or powers of individual local governments. Voters in 41 states responded by ratifying constitutional amendments prohibiting the state legislature to enact a special law for a named local government unless the concerned local governing body requested its enactment. Nevertheless, legislative abuses continued and resulted in constitutional amendments establishing an Imperio in Imperium (a federal system within a state) with the state legislature devolving authority to all general purpose governments over their respective structure, property and local affairs. 

Continued legislative abuses in the late 19th century generated a new type of constitutional home rule amendment directing the state legislature to devolve upon general purpose local governments adopting a new charter all powers capable of devolution except civil relations and the definition and punishment of a felony.1

The discretionary authority of most general purpose local governments has changed relatively little since 2012. Many state legislatures continue to impose mandates and restraints on general purpose local governments including state financial control boards for general purpose governments experiencing fiscal stress.

State-Local Legal Relations
These relations are exceptionally complex in a number of states. Constitutional provisions, statutes, state administrative rules and regulations, and court decisions determine the nature of state-local relations in various local government functional areas. Occasionally, a constitutional amendment devolves additional discretionary authority to general local governments. Here are some recent examples. 

The state of Washington Supreme Court in January 2014 ruled the system for financing public education unconstitutional. The court on Sept. 11, 2014, held the state legislature in contempt for lack of progress in developing a detailed plan for state funding of public education, but delayed punishment until after the 2015 legislative session. The estimated cost to change the public education financing system is a minimum of $4 billion biennially.

The Texas attorney general in 2014 issued opinion No. Ga-1078 pertaining to city ordinances banning the use of plastic bags by business firms. The opinion concluded such an ordinance (1) may run afoul of state law if the city adopted it for solid waste management purposes, and (2) a city probably is prohibited from assessing a fee on the sale or the use of a replacement bag.

The Texas First District Court of Appeals in 2013 reversed a trial court order invalidating a Houston air pollution ordinance by holding its provisions on registration and fee requirements were not inconsistent with state laws. The New York Court of Appeals in 2014 opined, by a 5 to 2 vote, general purpose local governments possess the legal authority to employ zoning ordinances to prohibit oil and gas drilling and fracking. More than 170 cities, towns and villages in the state banned or imposed a moratorium on fracking.

The Pennsylvania Supreme Court in 2014 invalidated a section of State Act 13 forbidding cities, townships and boroughs to use zoning to determine where fracking will be allowed. The New York Court of Appeals, the state’s highest court, in 2014 opined general-purpose local governments possess land use authority to prohibit oil and gas operations within their respective borders. The 2014 Minnesota State Legislature prohibited electronic cigarette use in buildings owned or operated by political subdivisions.

Local Government Structural Changes

The Dallas, Texas, Independent School Board of Trustees on June 27, 2014, appointed a 15-member commission to draft a home-rule school district charter. The California State Legislature in 2012 eliminated all redevelopment agencies. Texas Proposition 7 of 2013 authorizes each home rule municipality to add a procedure to its charter to fill a vacancy on its governing body. 

Section 7-3-173 of the Montana Code required each local government to adopt a resolution placing the question of conducting a local government review on the ballot at the primary election on June 3, 2014. The resolution mandated a specification of the number of elected commission members and the dollar amount or number of mills that would be permanently levied to fund the study commission. New York Gov. Andrew M. Cuomo in 2014 announced local government citizen reorganization empowerment grant awards to municipalities for the planning and the implementation of village dissolutions. The awards are part of the state’s local government efficiency program. 

California Gov. Jerry Brown in 2014 signed into law three bills creating local government agencies responsible for overseeing extraction of groundwater and replacing the state policy of permitting landowners generally to extract water beneath their respective land. The local agencies will prevent overdrafts of water. Approximately 40 percent of the water consumed in the state in a normal year is groundwater and the amount increases during droughts. 

The Illinois General Assembly in 2013 enacted Senate Bill 1585 allowing a dissolution referendum in a township in Cook County that is seven miles square and substantially coterminous with a municipality whose governing body exercises township board powers or has at least one member on the township board. The legislature in 2014 enacted a statute authorizing 1 percent of the voters in a fire protection district to petition for a referendum to determine whether the district should be dissolved and to add its territory to an adjoining district.

Local Government Authority
States continue to modify the authority of local governments as illustrated by changes in Georgia and Iowa.

Georgia Senate Bill 318 of 2014 authorizes the governing body of a city or county where the sale of alcoholic beverages is lawful for on-premises consumption to adopt a resolution or an ordinance authorizing the sale of on-premises consumption of alcohol from 12:30 p.m. to midnight on any Sunday during the St. Patrick’s Day holiday. Georgia Senate Bill 288 of 2014 requires each local government to submit for approval a watershed protection plan that includes watershed protection standards and procedures to the state Department of Natural Resources. Senate Bill 290 clarifies that a local government may appoint more than one person to serve as a dog control officer. If a local animal control board or board of health has not been designated by the jurisdiction, a dog owner who receives a notice of classification as the owner of a dangerous dog may request a hearing before the Probate Court. Georgia House Bill 384 requires each local governing authority that permits motorized carts upon public streets must erect signs warning motorists that such carts are authorized for use on   public streets.  

Georgia Senate Bill 284 of 2012 modernizes the state law on land banks and provides tools for land banks to address tax delinquent and abandoned property. Georgia House Bill 297 of 2012 expands the coverage of the open meeting law to include all offices in a county or a city, broadens the definition of a public record to include data and data fields, and requires cities and counties to make electronic copies available to citizens, or if the requestor prefers, printouts of electronic records or data from database fields used by the city or county.

Georgia Gov. Nathan Deal, utilizing a relatively new power, in 2013 removed six members of the DeKalb County School Board in response to a Southern Association of Colleges and Schools report on infighting by board members, questionable staff hiring practices, and a $16 million debt. Tennessee in 2012 initiated the removal of pupils from public schools with the lowest student test scores and graduation rates, and placing them in a special state-operated achievement school district. Most of these schools are run by charter operators and engage in frequent testing and data analysis.

The 2013 Iowa State Legislature—in Senate File 427—exempted cities with a population less than 15,000 from the requirement to adopt the uniform plumbing code and the international mechanical code. The 2014 legislature—in House File 2366— clarified the law surrounding city elections relative to filling vacancies in the city council by placing a vacant seat on the next city election ballot. The legislature also enacted a law—House File 2289— prohibiting the state and its subdivisions from using drones.

State-Local Fiscal Relations
The Center on Budget and Policy Priorities reported states in 2014 provided less funding per pupil for kindergarten through 12th grade than was provided six years earlier. Thirty-five states provided less funding, including 14 states that reduced funding by more than 10 percent.

The California Commission on State Mandates noted voters approved Proposition 1A of 2004 requiring the state for the first time to suspend a mandate if it did not fund it during any budget cycle. Sixty mandates were suspended during the 2013–14 fiscal year, including three suspended for the first time—domestic violence background checks, identity theft and voter identification procedures.

The Illinois Local Government Consolidation Commission, established in 2011, in 2013 issued a report urging the review of all state mandates. In 2014, the commission released a report recommending (1) identifying differences between possibly duplicated local governments, (2) investigating districts and authorities with power to establish and maintain police forces, (3) making consolidation and cooperation among local governments easier, (4) standardizing state statutes governing sanitary districts, (5) amending the state statute governing certain special districts to allow for the annexation, disconnection or dissolution of the units of government, (6) monitoring the progress of Public Act 098-0126 to determine whether DuPage County can be used as a model for how counties can promote consolidation statewide, (7) exploring how the state can encourage cooperation by providing information and resources, and (8) reviewing all state mandates to ensure they are not unnecessary burdens on the various local governments and the taxpayers. 

In a related action, the voters in Evanston, Ill., approved a nonbinding referendum to dissolve its coterminous township. Illinois Public Act 098-0127 of 2013 authorized Evanston voters to determine whether the municipality of Evanston should assume the duties and functions of the coterminous township. Voters in Evanston Township on March 18, 2014, approved the dissolution proposal by an approximate two-to-one margin and township operations ceased on April 30, 2014. 

The New York State Legislature in 2013 created a state Fiscal Restructuring Board with authority to provide each fiscally distressed municipality with a blueprint for recovery and up to $5 million in state loans and/or grants if the municipality agrees to implement the blueprint. The New York Mandate Relief Council in December 2013 reported the state legislature established a new pension tier expected to reduce pension costs by $80 billion over 30 years, and commenced a state takeover of the growth in the local share of Medicaid costs, thereby saving counties and New York City an estimated $1.2 billion over five years.

Former Virginia Gov. Bob McDonnell’s Task Force for Local Government Mandate Review issued a 2013 interim report recommending (1) exploration of the creation of an intergovernmental  roundtable in each state agency to foster communications and mutual problem-solving by the state and its local governments; (2) reinstatement of the first day introduction requirement for each bill with a local government fiscal impact; and (3) establishment of a process whereby local governments or school divisions representing 35 percent of the state’s population could petition the Commission on Local Government to review bills or budget amendments that would impact unfunded or underfunded mandates on local governments or school divisions.

The League of Minnesota Cities reported the proportion of cities reporting an improved ability to meet financial needs increased from 51 percent in 2012 to 71.2 percent in 2013. The League of Oregon Cities issued a report in 2014, “Oregon Property Tax Capitalization: Evidence from Portland,” revealing the state property tax “structure is significantly affecting home sales in Portland.” The Wisconsin Legislative Fiscal Bureau in 2014 released a report on “unfunded mandates and items that would restrict local control enacted by the 2011–2012 legislative session” involving more than 60 laws.

The Maine Municipal Association in 2014 issued a highly critical Municipal Priorities Paper focusing primarily on state reductions in financial assistance for local governments. The paper alleges the state legislature, in its first session in 2013, “broke a number of longstanding agreements and arrangements with local government in an unprecedented way.” Chapter 2 focuses on the increased property tax burden, notes voters had directed the state legislature to appropriate funds to pay 55 percent of the cost of K–12 public education, and reports the legislature in 2012 “is again 10 full percentage points—nearly $200 million a year—short of compliance.” 

Chapter 4 of the paper reports the state government has retreated from investments in transportation infrastructure, and cites the action by the 2013 state legislature reducing the local share of the state’s transportation related budget to 9 percent. The focus of Chapter 5 is state mandates, and highlights the fact, “the state constitution was amended by the voters to make the enactment or promulgation of an unfunded state mandate illegal and unenforceable unless a supermajority of the lawmakers … knowingly and expressly support the mandate without funding.” The report admits there has been a reduction in the number of enacted mandates to a low of 11 in 2013–14.

The Manhattan Institute for Policy Research in 2013 issued a report, Defeating Fiscal Distress: A State Responsibility, offering four recommendations for state government action. The report suggests states with strong public sector unions should grant mandate relief to local governments in matters of personnel spending, strengthen existing oversight policies toward local finances, develop strong and general intervention policies before cases of fiscal distress arise, allow local governments to file for Chapter 9 municipal bankruptcy only as a last resort, and appoint a state-appointed authority to guide municipalities through bankruptcy. 

The Pew Charitable Trusts released in 2013 a report—The State Role in Local Government Financial Control—focusing on the stages of municipal financial difficulty: distress, crisis and
bankruptcy, the reasons states may intervene in local government problems, and state approaches to intervention. Nineteen states have laws relative to state oversight of the finances of local governments. Fourteen of the states allow the receiver, state agency or control board to approve proposed bond sales and/or renegotiate the terms of the bonds on behalf of a municipality. Seven states allow interveners to reduce labor costs in distressed cities by renegotiating union labor contracts. Ten states grant interveners the power to increase existing taxes or to levy new taxes. The receiver in Central Falls, R.I., used this power to increase local taxes by 4 percent in each of five years. State laws in Michigan, Nevada and Tennessee
permit an intervener to disincorporate or dissolve a municipality and consolidate it with a neighboring municipality.

A number of governors declared a financial emergency in a municipality and appointed an emergency manager for the unit. An example is Pontiac, Mich., where the governor in 2009
appointed the first of three emergency managers who successfully improved the fiscal health of the city to the point where Gov. Rick Snyder in 2013 determined there no longer was a need for an emergency manager, and appointed a transition advisory board with authority over city spending. In a related development, New Jersey Gov. Chris Christie announced in 2013 the state was assuming control of the Camden public school system because of the poor performance of students. 

Municipal bankruptcies were common during the Great Depression, and threats of bankruptcies increased in the 1970s. The New York State Legislature responded to municipal fiscal distress by establishing a state finance control board for each of the following cities and one county: New York City in 1975, Yonkers in 1978, Troy in 1995, Buffalo in 2003, and Nassau County in 2000. New York State Comptroller Thomas P. DiNapoli in 2014 reported Buffalo’s financial condition has improved, but 10 counties, 17 towns and one village are fiscally stressed with low fund balances, operating deficits and limited cash on hand. The city of Mechanicville, for example, had only 10 percent of the needed cash and issued short-term notes to obtain additional cash.

The number of municipalities declaring fiscal distress or bankruptcies continued to increase in the 21st century. In 2012, San Bernardino, Calif., became the third city in the state to seek bankruptcy court protection; Vallejo in 2008 and Stockton in 2013 sought such protection. A number of officials of the city of Harrisburg, Pa., favored seeking U.S. Bankruptcy Court protection, but the 2013 Pennsylvania State Legislature enacted a statute that made the city ineligible to seek such protection. The state appointed a receiver for the city who developed a plan for selling or leasing city assets to raise revenue to restore financial stability.

Michigan Gov. Rick Snyder on March 14, 2013, appointed a bankruptcy lawyer as the emergency manager for Detroit, and the city on July 18, 2013, sought bankruptcy protection under Chapter 9 of the U.S. Bankruptcy Act; it is the largest city in the nation to declare bankruptcy. The city in 2014 sought U.S. Bankruptcy Court Judge Steven W. Rhodes’ approval of the city’s plan to eliminate in excess of $7 billion of the city’s estimated $18 billion debt and to devote approximately $1.5 billion to improving city services. A number of creditors, including retired city employees and a bond insurance company, supported the city’s plan. The mayor and the city council regained most of their powers to make decisions on Sept. 25, 2014, but the emergency manager remains in office and retains authority over bankruptcy issues. Detroit’s bankruptcy also has a major impact on numerous municipalities as the city supplies water to approximately 40 percent of the state’s population. Twelve other cities and school districts in Michigan are under state financial oversight. 

Can bankruptcies of local governments be prevented? The answer clearly is yes, as revealed by the experience of North Carolina since the Great Depression of the 1930s. The state legislature in 1931 created the state Local Government Commission with authority to approve or reject proposed borrowing by local governments. The result is the highest credit ratings for these governments by the three credit rating agencies. Although the Tennessee State Legislature did not adopt the North Carolina approach, Tennessee requires local governments seeking to borrow money to have debt management policies based on specific state guidelines. 

Legal Services
The New Jersey State Comptroller in 2013 released a 38-page report that found many local governments failed to control excessive and improper payments for legal services. One township paid an attorney a salary for a no-work job and was unable to identify any services he provided. Two local governments paid their respective legal counsel for routine clerical and administrative work that should have been performed free of charge under the attorney’s contract. A township paid a law firm at the attorney rate of $150 per hour for administrative
work performed by a secretary, such as receiving messages and photocopying documents. The report also cited a series of billing errors that cost taxpayers thousands of dollars. Several
local government officers admitted they had not conducted a substantive review of legal bills they received and paid. 

Retiree Health Care and Non-Pension Benefits
The Massachusetts General Court (state legislature) in 2011 established the Massachusetts Special Commission to Study Retiree Health Care and Other Non-Pension Benefits because of concerns about the ability to maintain the health care financing system. The unfunded liability for state and local governments was approximately $46 billion and annual spending to provide health benefits exceeds $1 billion. Municipalities are responsible for a proportionally larger share of increased retiree health care costs, in comparison to pensions, because they
are responsible for proving health benefits to retired teachers who participate in the state teachers public employees systems for benefits. 

The commission submitted its recommendations to the governor and the general court in 2013, but made no recommendation relative to accidental disability retirements.  Selected  recommendations follow. (1) Municipalities should adopt the Commonwealth’s policy of providing prorated credit for part-time service based on the number of hours employees work each week. (2) The minimum age at which former employees become eligible for retiree health care should be increased by five years. (3) The minimum years of service for eligibility to receive retiree health care benefits should be increased from 10 to 20 years. (4) Benefits should be prorated based on the each retiree’s years of service. (5) Current retirees should be exempt from the benefit design changes listed above. (6) Accidental disability retirements should be exempt from the proposed benefit design changes. (7) Municipal retirees’ contributions should be frozen for three years. (8) When determining eligibility for retiree health benefits, municipalities should credit part-time service. (9) Municipalities should put their health plans out to competitive bidding to lower costs. (10) Municipalities should contribute not less than a 50 percent premium for future surviving spouses. 

1 Jefferson B. Fordham, Model Constitutional Provisions for Municipal Home Rule (Chicago: American Municipal Association, 1953). 

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