What Are Unfunded Mandates?

Definition and Examples of Unfunded Mandates

Unfunded mandates result when the federal government passes laws that require other levels of government to do or offer certain things without also providing funds for them. These laws can affect state, local, or tribal governments.

Often, when federal laws are passed, they include funding for whatever must happen as a result. When they don't, the programs they create are unfunded. But they are still mandatory. This is why they are known as unfunded mandates.

Reducing federal funds to administer Food Stamps or other welfare programs, for example, creates unfunded mandates. State and local governments must still offer these programs at the level federal laws require.

In 1998, Congress reduced federal funds for states to administer the food stamp program. That cost the states between $200 million and $300 million a year. 

Unfunded mandates can also affect private sector individuals and organizations.

How Do Unfunded Mandates Work?

Congress often passes laws that impact other levels of government. Often, these laws will be part of the federal budget. Congress will appropriate funds to enact them.

Sometimes Congress doesn't appropriate funds. But the laws still must be followed. This is when unfunded mandates result.

The federal government also creates an unfunded mandate when it reduces a group's ability to pay for an existing mandate. It does this in three ways:

1. Cutting funds for the program
2. Changing the requirements to get funds
3. Interfering with a government's ability to raise funds through taxes

Those affected by unfunded mandates claim they are unfair. This doesn't always mean the laws themselves are unfair. The argument is that Congress shouldn't create laws for other bodies without providing the funding.

Here are some examples of unfunded mandates:

1. Cutting federal matching funds for states to administer child support enforcement
2. Requiring public transit agencies to upgrade security, training, and background checks
3. Requiring commuter railroads to install train control technology

Unfunded mandates only became an issue during the 1970s and 1980s. Prior to that, Congress made sure there was funding for the states to fulfill federal requirements. When Congress began cutting the funds, states weren't happy about the extra burden.

Notable Happenings

Many laws either create unfunded mandates or are meant to respond to them.

No Child Left Behind Act of 2001

Congress created an unfunded mandate with the No Child Left Behind Act. States and school districts argue they have many costs that aren't paid for by federal funding.

But federal judges ruled that the states could opt out of the program. That makes it voluntary; thus, it is no longer a mandate. 

Internet Tax Nondiscrimination Act of 2004

Another unfunded mandate was the Internet Tax Nondiscrimination Act of 2004. It said states couldn't collect sales taxes on internet purchases. This cost states between $80 million and $100 million in annual income.

Unfunded Mandates Reform Act

On March 15, 1995, Congress passed the Unfunded Mandates Reform Act (UMRA). The Act says the Congressional Budget Office (CBO) must identify and estimate the costs of any unfunded mandates.

That includes bills proposed by Congress. It also includes regulations set by federal agencies.

The thresholds are adjusted every year for inflation. The 2019 threshold was $82 million for intergovernmental mandates. It was $164 million for private-sector mandates.

Any Congressional committees that propose such bills must show where the funding will come from. If they don't, then the bill will be removed. It will only move forward if a majority vote keeps it alive.

These rules are not automatically enforced; A member of Congress must raise an objection in order for a bill to be removed due to an unfunded mandate.

As a result of the UMRA, the number of unfunded mandates has been trending down. It is still more common, though, for Congress to pass unfunded mandates that affect the private sector than the public sector.