Henes: The Story of Unfunded State Mandates

“Now Main Street's whitewashed windows and vacant stores / Seems like there ain't nobody wants to come down here no more”

- Bruce Springsteen, My Hometown

Last Friday’s New York Times ran an article featuring my hometown, Croton-on-Hudson, New York. Croton-on-Hudson is located in Westchester, County and filled with hardworking men and women who were attracted to the town due to its vibrant community, good neighbors and strong school system.

Croton-on-Hudson, however, is not immune to the budgetary issues facing states, cities and towns across the nation. According to the New York Times article, unfunded state mandates are imposing unnecessary costs on Croton and other communities, which are making their fiscal situation worse.

Over the past decade, well-intentioned politicians enacted approximately 250 laws mandating local schools to act in certain ways with the intention of making the systems safer and stronger.

Due to their poor fiscal situations, school districts are re-examining these mandates, which average almost 21 percent of their budgets and include requirements such as using three auditors instead of one in their budget process, calculating each student’s body mass index and providing paid leave for teachers who go in to have a mammogram or prostate screening.

The problem is that these mandates are non-discretionary and, consequently, by complying with them schools will need to reduce funding for their core business - providing the best education for their students.

The story of unfunded state mandates teaches a valuable lesson as states and municipalities struggle to fix their dire fiscal situations. When the economy was thriving, politicians engaged in excessive spending, creating a variety of well-intentioned, but non-critical programs.

Today, as states and local governments are attempting to fix their problems, a comprehensive and careful analysis of these programs and the annual spending for them is warranted.

The analysis should be aimed at eliminating wasteful spending to assure that money is available to pay for essential services, including education, police, fire and sanitation. Taxpayers expect the government to use their hard-earned money efficiently and productively, not to fund unnecessary programs.

We have already witnessed once thriving cities turn into virtual ghost towns. This happens when industries leave and governments need to not only cut the budget fat but also the muscle and the bone.

While the national press focuses on the fiscal woes of the federal government, certain states and major cities, small towns, which are the true backbone of America, cannot be ignored. It’s in these towns where so many of our children are educated and learn to be good neighbors and productive members of society.

We need to protect these towns and assure that they can spend their money on what’s critical for their communities to prosper and not be hamstrung by unfunded state mandates.

When I go back to Croton-on-Hudson to visit, I want to be able to walk down Grand Street, past the pharmacy, the local bar and delicatessen. I want to walk up Old Post Road South, past the high school and see kids learning, playing sports and taking part in after school programs.

If we don’t use some common sense to fix the fiscal problems, my hometown - and so many others - may no longer be a place where people want to live. When I take my children back to Croton, I want to sit them up behind the wheel and say kids “take a good look around,” this is my hometown.


Jon Henes is a partner in the Restructuring Group of the law firm of Kirkland & Ellis. Jon's practice involves representing debtors (including portfolio, privately-held and public companies), creditors' committees and distressed investors (including hedge funds, private equity funds and companies) in acquisitions, restructurings and bankruptcy cases.