1.1                          A bill for an act 
  1.2             relating to local government; regulating the 
  1.3             development, imposition, and management of state 
  1.4             mandates upon local political subdivisions; amending 
  1.5             Minnesota Statutes 1994, section 14.11, subdivision 1; 
  1.6             proposing coding for new law in Minnesota Statutes, 
  1.7             chapters 3 and 14; repealing Minnesota Statutes 1994, 
  1.8             section 3.982. 
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  [3.986] [DEFINITIONS.] 
  1.11     Subdivision 1.  [SCOPE.] The terms used in sections 1 to 4 
  1.12  have the meanings given them in this section. 
  1.13     Subd. 2.  [COSTS MANDATED BY THE STATE.] (a) "Costs 
  1.14  mandated by the state" means increased costs that a political 
  1.15  subdivision is required to incur as a result of: 
  1.16     (1) a law enacted after June 30, 1995, which mandates a new 
  1.17  program or an increased level of service of an existing program; 
  1.18     (2) an executive order issued after June 30, 1995, which 
  1.19  mandates a new program; 
  1.20     (3) an executive order issued after June 30, 1995, which 
  1.21  implements or interprets a state statute and, by its 
  1.22  implementation or interpretation, increases program levels above 
  1.23  the levels required before July 1, 1995; 
  1.24     (4) a statute enacted after June 30, 1995, or executive 
  1.25  order issued after June 30, 1995, which implements or interprets 
  1.26  a federal statute or regulation and, by its implementation or 
  1.27  interpretation, increases program or service levels above the 
  2.1   levels required by the federal statute or regulation; 
  2.2      (5) a statute enacted after June 30, 1995, or executive 
  2.3   order issued after June 30, 1995, which implements or interprets 
  2.4   a statute or amendment adopted or enacted pursuant to the 
  2.5   approval of a statewide ballot measure by the voters and, by its 
  2.6   implementation or interpretation, increases program or service 
  2.7   levels above the levels required by the ballot measure; 
  2.8      (6) a statute enacted after June 30, 1995, or executive 
  2.9   order issued after June 30, 1995, which removes an option 
  2.10  previously available to political subdivisions and thus 
  2.11  increases program or service levels or prohibits a specific 
  2.12  activity and so forces political subdivisions to use a more 
  2.13  costly alternative to provide a mandated program or service; 
  2.14     (7) a statute enacted after June 30, 1995, or executive 
  2.15  order issued after June 30, 1995, which requires that an 
  2.16  existing program or service be provided in a shorter time period 
  2.17  and thus increases the cost of the program or service; 
  2.18     (8) a statute enacted after June 30, 1995, or executive 
  2.19  order issued after June 30, 1995, which adds new requirements to 
  2.20  an existing optional program or service and thus increases the 
  2.21  cost of the program or service because the political 
  2.22  subdivisions have no reasonable alternative other than to 
  2.23  continue the optional program; 
  2.24     (9) a statute enacted after June 30, 1995, or executive 
  2.25  order issued after June 30, 1995, which creates new revenue 
  2.26  losses by new property or sales and use tax exemptions; 
  2.27     (10) a statute enacted after June 30, 1995, or executive 
  2.28  order issued after June 30, 1995, which requires costs 
  2.29  previously incurred at local option that have subsequently been 
  2.30  mandated by the state; or 
  2.31     (11) a statute enacted or an executive order issued after 
  2.32  June 30, 1995, which requires payment of a new fee or increases 
  2.33  the amount of an existing fee. 
  2.34     When state statutory or executive actions are intended to 
  2.35  achieve compliance with federal statutes or regulations or court 
  2.36  orders, state mandates shall be determined as follows:  
  3.1      (i) if the federal statute or regulation or court order is 
  3.2   discretionary, the state statutory or executive action is a 
  3.3   state mandate; 
  3.4      (ii) if the state statutory or executive action exceeds 
  3.5   what is required by the federal statute or regulation or court 
  3.6   order, only the provisions of the state action which exceed the 
  3.7   federal requirements are a state mandate; and 
  3.8      (iii) if the state statutory or executive action does not 
  3.9   exceed what is required by the federal statute or regulation or 
  3.10  court order, the state action is not a state mandate.  
  3.11     (b) Costs mandated by the state include the costs of:  
  3.12     (1) a rule issued after June 30, 1995, which mandates a new 
  3.13  responsibility; and 
  3.14     (2) a rule issued after June 30, 1995, which implements or 
  3.15  interprets a state statute, and by doing so increases program 
  3.16  levels above the levels required before June 30, 1995. 
  3.17     Subd. 3.  [EXECUTIVE ORDER.] "Executive order" means an 
  3.18  order, plan, requirement, or rule issued by the governor, an 
  3.19  official serving at the pleasure of the governor, or an agency, 
  3.20  department, board, or commission of state government.  
  3.21  "Executive order" does not include an order, plan, requirement, 
  3.22  or rule issued by a regional water quality control board.  
  3.23     Subd. 4.  [MANDATE.] A "mandate" is a requirement imposed 
  3.24  upon a political subdivision by the legislature, a state agency, 
  3.25  or judicial authority which, if not complied with, results in 
  3.26  (a) civil liability, (b) criminal penalty, or (c) administrative 
  3.27  sanctions such as reduction or loss of funding. 
  3.28     Subd. 5.  [POLITICAL SUBDIVISION.] A "political 
  3.29  subdivision" is a county, home rule charter or statutory city, 
  3.30  town, school district, or other taxing district or municipal 
  3.31  corporation.  
  3.32     Subd. 6.  [REQUIRING AN INCREASED LEVEL OF 
  3.33  SERVICE.] "Requiring an increased level of service" includes 
  3.34  requiring that an existing service be provided in a shorter time.
  3.35     Subd. 7.  [RULE.] "Rule" means a rule, order, or standard 
  3.36  of general application adopted by a state agency to implement, 
  4.1   interpret, or make specific the law it enforces or administers 
  4.2   or to govern its procedure.  "Rule" includes an amendment to a 
  4.3   rule.  "Rule" does not include rules that relate only to the 
  4.4   internal management of a state agency.  
  4.5      Subd. 8.  [SAVINGS.] "Savings" includes budget reductions 
  4.6   and the freeing of staff or resources to be reassigned to a 
  4.7   political subdivision's other areas of concern.  
  4.8      Sec. 2.  [3.987] [FISCAL NOTES FOR STATE-MANDATED ACTIONS.] 
  4.9      Subdivision 1.  [DIVISION OF STATE AND LOCAL 
  4.10  MANDATES.] When the state proposes to mandate that a political 
  4.11  subdivision take an action, and when reasonable compliance with 
  4.12  that action would force the political subdivision to incur costs 
  4.13  mandated by the state, a fiscal note shall be prepared as 
  4.14  provided in section 3.98, subdivision 2, and made available to 
  4.15  the public upon request.  If the action is among the exceptions 
  4.16  listed in section 3, a fiscal note need not be prepared.  
  4.17     A division of state and local mandates in the office of the 
  4.18  state auditor is created.  The division shall make a reasonable 
  4.19  and timely determination of the estimated and actual financial 
  4.20  effects on each political subdivision of each program mandated 
  4.21  by the legislature and each rule proposed by an administrative 
  4.22  agency.  The division may require the commissioner of the 
  4.23  appropriate administrative agency of the state to supply in a 
  4.24  timely manner any information determined by the division to be 
  4.25  necessary to determine local financial effects.  The 
  4.26  commissioner shall convey the requested information to the 
  4.27  division with a signed statement to the effect that the 
  4.28  information is accurate and complete to the best of the 
  4.29  commissioner's ability.  
  4.30     The division when requested shall update its determination 
  4.31  of financial effects based on either actual cost figures or 
  4.32  improved estimates or both.  
  4.33     Subd. 2.  [MANDATE EXPLANATIONS.] Any bill introduced in 
  4.34  the legislature after June 30, 1995, which seeks to impose 
  4.35  program or financial mandates on political subdivisions must 
  4.36  include an attachment that gives appropriate responses to the 
  5.1   following guidelines.  It must state and list:  
  5.2      (1) the policy goals which are sought to be attained, the 
  5.3   performance standards that are to be imposed, and an explanation 
  5.4   why the goals and standards will best be served by requiring 
  5.5   compliance by political subdivisions; 
  5.6      (2) performance standards which will allow political 
  5.7   subdivisions flexibility and innovation of method in achieving 
  5.8   these goals; 
  5.9      (3) the reasons for each prescribed standard and the 
  5.10  process by which each standard shall govern inputs such as 
  5.11  staffing and other administrative aspects of the program; 
  5.12     (4) the sources of additional revenue, in addition to 
  5.13  existing funding for similar programs, that are directly linked 
  5.14  to imposition of the mandates that will provide adequate and 
  5.15  stable funding for their requirements; 
  5.16     (5) what input has been obtained to ensure that the 
  5.17  implementing agencies have the capacity to carry out the 
  5.18  delegated responsibilities; and 
  5.19     (6) the reasons why less intrusive measures such as 
  5.20  financial incentives or voluntary compliance would not yield the 
  5.21  equity, efficiency, or desired level of statewide uniformity in 
  5.22  the proposed program.  
  5.23     Subd. 3.  [LOCAL INVOLVEMENT; LAWS.] Any bill introduced in 
  5.24  the legislature after June 30, 1995, which seeks to impose a 
  5.25  program or financial mandate on political subdivisions must 
  5.26  include as an attachment a description of the efforts put forth, 
  5.27  if any, to involve political subdivisions in the creation or 
  5.28  development of the proposed mandate.  
  5.29     Subd. 4.  [NO MANDATE RESTRICTION.] Except as specifically 
  5.30  provided by this act, nothing in this act shall be construed to 
  5.31  restrict or eliminate the authority of the state to create or 
  5.32  impose programs by legislative mandate upon political 
  5.33  subdivisions. 
  5.34     Sec. 3.  [3.988] [EXCEPTIONS TO FISCAL NOTES.] 
  5.35     Subdivision 1.  [COSTS RESULTING FROM INFLATION.] A fiscal 
  5.36  note need not be prepared for increases in the cost of providing 
  6.1   an existing service if the increases result directly from 
  6.2   inflation.  "Resulting directly from inflation" means 
  6.3   attributable to maintaining an existing level of service rather 
  6.4   than increasing the level of service.  A cost-of-living increase 
  6.5   in welfare benefits is an example of a cost resulting directly 
  6.6   from inflation.  
  6.7      Subd. 2.  [COSTS NOT THE RESULT OF A NEW PROGRAM OR 
  6.8   INCREASED SERVICE.] A fiscal note need not be prepared for 
  6.9   increased local costs that do not result from a new program or 
  6.10  an increased level of service. 
  6.11     Subd. 3.  [MISCELLANEOUS EXCEPTIONS.] A fiscal note or an 
  6.12  attachment as provided in section 2, subdivision 2, need not be 
  6.13  prepared for the cost of a mandated action or rule if the law or 
  6.14  rule containing the mandate:  
  6.15     (1) accommodates a specific local request; 
  6.16     (2) results in no new local government duties; 
  6.17     (3) leads to revenue losses from exemptions to taxes other 
  6.18  than sales, use, or property taxes; 
  6.19     (4) provided only clarifying or conforming, nonsubstantive 
  6.20  charges on local government; 
  6.21     (5) imposes additional net local costs which are minor 
  6.22  (less than $200 for any single local government if the mandate 
  6.23  does not apply statewide or less than one-tenth of a mill times 
  6.24  the entire value of taxable property in the state if the mandate 
  6.25  is statewide) and do not cause a financial burden on local 
  6.26  government; 
  6.27     (6) is a legislative mandate or executive order enacted 
  6.28  before July 1, 1995, or a rule initially implementing 
  6.29  legislation enacted before July 1, 1995; 
  6.30     (7) implements something other than a state statute or 
  6.31  executive order, such as a federal, court, or voter-approved 
  6.32  mandate; 
  6.33     (8) defines a new crime or redefines an existing crime or 
  6.34  infraction; 
  6.35     (9) results in savings that equal or exceed costs; 
  6.36     (10) requires the holding of elections; 
  7.1      (11) insures due process or equal protection; 
  7.2      (12) provides for the notification and conduct of public 
  7.3   meetings; 
  7.4      (13) establishes the procedures for administrative and 
  7.5   judicial review of actions taken by political subdivisions; 
  7.6      (14) protects the public from malfeasance, misfeasance, or 
  7.7   nonfeasance by officials of political subdivisions; 
  7.8      (15) relates directly to financial administration, 
  7.9   including the levy, assessment, and collection of taxes; 
  7.10     (16) relates directly to the preparation and submission of 
  7.11  financial audits necessary to the administration of state laws; 
  7.12  or 
  7.13     (17) requires uniform standards to apply to public and 
  7.14  private institutions without differentiation. 
  7.15     Sec. 4.  [3.989] [REIMBURSEMENT TO LOCAL POLITICAL 
  7.16  SUBDIVISIONS FOR COSTS OF STATE MANDATES.] 
  7.17     Subdivision 1.  [DEFINITIONS.] For purposes of this 
  7.18  section, class A and class B state mandates have the meaning 
  7.19  given them.  
  7.20     (a) "Class A state mandates" are those laws under which the 
  7.21  state mandates to political subdivisions, their participation, 
  7.22  the organizational structure of the program, and the procedural 
  7.23  regulations under which the law must be administered.  
  7.24     (b) "Class B state mandates" are those mandates that allow 
  7.25  the political subdivisions to opt for administration of a law 
  7.26  with program elements mandated beforehand and with an assured 
  7.27  revenue level from the state of 90 percent of full program and 
  7.28  administrative costs.  
  7.29     Subd. 2.  [REPORT.] The division of state and local 
  7.30  mandates shall submit to the department of finance by September 
  7.31  1, 1996, and by September 1 of each year thereafter, a report by 
  7.32  political subdivisions of the costs of class A state mandates 
  7.33  established after June 30, 1995.  
  7.34     The department of finance shall annually include the 
  7.35  statewide total of the statement of costs of class A mandates as 
  7.36  a notation in the state budget for the next fiscal year.  
  8.1      Subd. 3.  [CERTAIN POLITICAL SUBDIVISIONS; REPORT.] The 
  8.2   political subdivisions that have opted to administer class B 
  8.3   state mandates shall report to the division of state and local 
  8.4   mandates by September 1, 1996, and by September 1 of each year 
  8.5   thereafter, identifying each instance when revenue for a class B 
  8.6   state mandate has fallen below 85 percent of the total cost of 
  8.7   the program and the political subdivision intends to cease 
  8.8   administration of the program.  
  8.9      The division shall forward a copy of the report to the 
  8.10  department of finance and the chairs of the senate finance 
  8.11  committee and the house appropriations committee for inclusion 
  8.12  of the shortfall as a line item appropriation in the state 
  8.13  budget for the next fiscal year.  
  8.14     The political subdivision may exercise its option to cease 
  8.15  administration only if the legislature has failed to include the 
  8.16  shortfall as an appropriation in the state budget for the next 
  8.17  fiscal year.  
  8.18     Subd. 4.  [EXEMPTIONS.] Statutes and executive orders 
  8.19  enumerated in section 3 are exempted from this section. 
  8.20     Sec. 5.  Minnesota Statutes 1994, section 14.11, 
  8.21  subdivision 1, is amended to read: 
  8.22     Subdivision 1.  [FISCAL NOTE ON RULE IN NOTICE.] If the 
  8.23  adoption of a rule by an agency after June 30, 1995, will 
  8.24  require the expenditure of more than $....... of local public 
  8.25  money by local public bodies in the two years immediately 
  8.26  following the adoption of the rule, the appropriate notice of 
  8.27  the agency's intent to adopt a rule shall be accompanied by a 
  8.28  written statement giving the agency's reasonable estimate of the 
  8.29  total cost to all local public bodies in the state to implement 
  8.30  the rule for the two years immediately following adoption of the 
  8.31  rule if the estimated total cost exceeds $100,000 in either of 
  8.32  the two years. the agency shall submit the proposed rule to the 
  8.33  division of state and local mandates in the office of state 
  8.34  auditor.  The division has 60 days from the date of receipt of 
  8.35  the proposed rule to prepare a fiscal note on the rule.  The 
  8.36  notice of the agency's intent to adopt the rule must include an 
  9.1   announcement that a free copy of the division's fiscal note is 
  9.2   available on request from the agency.  If the division fails to 
  9.3   produce a fiscal note within 60 days from the date of receipt of 
  9.4   the proposed rule, the agency may give notice of its intent to 
  9.5   adopt the rule without having received the division's report, 
  9.6   and its notice of intent to adopt the rule shall contain a 
  9.7   statement giving the agency's reasonable estimate of the total 
  9.8   cost to local public bodies to implement the rule for the two 
  9.9   years immediately following adoption of the rule.  The 
  9.10  requirements of this subdivision do not apply to emergency rules 
  9.11  or to rules exempt from fiscal note requirements under section 
  9.12  3.  For purposes of this subdivision, local public bodies shall 
  9.13  mean officers and governing bodies of the political subdivisions 
  9.14  of the state and other officers and bodies of less than 
  9.15  statewide jurisdiction which have the authority to levy taxes. 
  9.16     Sec. 6.  [14.401] [PERIODIC REVIEW OF ADMINISTRATIVE 
  9.17  RULES.] 
  9.18     Subdivision 1.  [DEFINITIONS.] The terms defined in section 
  9.19  3.986, subdivision 1, apply to this section. 
  9.20     Subd. 2.  [SIGNIFICANT FINANCIAL IMPACT.] The division of 
  9.21  state and local mandates in the office of state auditor shall 
  9.22  review, every five years, the rules adopted after June 30, 1995, 
  9.23  that have significant financial impact upon political 
  9.24  subdivisions.  For purposes of this section, "significant 
  9.25  financial impact" means requiring local political subdivisions 
  9.26  to expand existing services, employ additional personnel, or 
  9.27  increase local expenditures.  The division shall determine the 
  9.28  costs and benefits of each rule and submit a report to the 
  9.29  legislative commission to review administrative rules with its 
  9.30  opinion, if any, for the continuation, modification, or 
  9.31  elimination of each rule.  
  9.32     Sec. 7.  [REPEALER.] 
  9.33     Minnesota Statutes 1994, section 3.982, is repealed.