CRC - Expanding Legislative Fiscal Impact Statements
How can we know the true cost that proposed legislation would impose on Michigan's local governments, businesses, and individuals? This is the question Citizens Research Council of Michigan asks in its new report The Cost of Legislation: Expanding Michigan's Fiscal Notes. The report explores how Michigan's legislative fiscal agencies might go about estimating costs for proposed legislation that is aimed at those outside of state government. In Michigan, these estimates, called fiscal notes, are critical in informing state policymakers of the true spending and revenue impacts of legislation.
Nearly every state in the nation has a process for estimating the costs of proposed and enacted legislation on state government. In Michigan, the nonpartisan House and Senate fiscal agencies are responsible for assessing the changes that would occur if proposed bills are enacted. These assessments typically include quantitative impacts of bills that would affect the operations of state government, but typically do not include fiscal impact statements for bills that would affect parties outside of local government.
"Our analysis shows that of the legislation reviewed by committees, most fiscal impacts are determined to be unknown or indeterminate," says CRC Research Associate Nicole Bradshaw. "While some other states are able to determine costs for parties outside of state government on a more frequent basis, several obstacles prevent Michigan's fiscal agencies from assigning quantitative fiscal estimates." In particular the report identifies the fiscal agencies' limited data access, the full-time nature of the Michigan legislature, the speed of Michigan's legislative process, and lack of expertise of non-state financial statements as hindrances in determining the true costs of legislation.
The report also discusses how the fiscal agencies may play a role in assessing whether legislation imposes a mandate on local governments. Under Article IX, Section 29 of the Michigan Constitution, generally referred to as the Headlee Amendment, the state cannot enforce a mandate on local governments without funding. "Accurate fiscal estimates would help state policymakers examine the cost legislation would impose on local governments and could be a step forward in ensuring that the state complies with this portion of the Headlee Amendment," said Bradshaw.
If policymakers wish to expand the scope of fiscal notes, CRC's report provides several recommendations including ways to improve access to necessary local government, business, and individual data as well as the need for the legislature to allocate additional funding to the fiscal agencies to ensure they have sufficient resources to expand their duties.
The full report is available at no cost on the Citizens Research Council's website, www.crcmich.org.