Background: Political subdivisions of the state include counties, cities, towns, school districts, port districts, and special purpose districts. State laws impose a variety of obligations on these political subdivisions. Some of these requirements may impose specific obligations based on the individual type or purpose of the district. For example, state education laws contain many directives to school districts, and state growth management laws require cities and counties to undertake certain duties. Other requirements are imposed on political subdivisions as the result of generally applicable laws, such as the workers' compensation program.

Political subdivisions receive revenue from a variety of sources. Many political subdivisions are authorized to levy regular property taxes, and some may collect excess property tax levies. Political subdivisions may also be authorized to collect excise taxes, regulatory and user fees, and other types of revenue.

In addition, political subdivisions may receive revenue distributions from the state. The state shares some revenue streams with local governments – for example, cities and counties receive a share of profits and taxes on state liquor sales, and a share of the state motor vehicle fuel tax. In other cases, the state may distribute state General Fund revenues to local governments under a statutory formula, as in certain criminal justice assistance distributions. In addition, the state may make direct appropriations to political divisions, such as funding appropriated for allocation to school districts or county public health districts in the 2009-11 biennial budget. In some instances, the state funding is for specific purposes; in other cases, the funding is for general use of the political subdivision.

Initiative 62 (1979), as modified by Initiative 601 (1993) and Referendum 49 (1998), requires the state in some circumstances to reimburse political subdivisions for costs imposed by the state. Specifically, if the state imposes on a political subdivision the cost of a new program or increased level of service under an existing program, the state may be obligated to reimburse the political subdivision. Under court rulings that interpret the requirement, reimbursement is necessary where the state imposes obligations that result in a measurable, quantifiable increase in the level of services to the public (Tacoma v. State, 1991).

Reimbursement may be made by specific appropriation, or by increases in revenue distributions that occur after January 1, 1998. The Legislature, in consultation with the Office of Financial Management, determines the costs of the new programs or increased levels of services under existing programs.

Summary of Bill: Certain state requirements imposed on political subdivisions are made optional or are otherwise revised.

School Districts. State requirements regarding truancy are modified. The requirements that a school provide notice, schedule conferences, and take other steps when a student over age 7 has unexcused absences are limited to students in the sixth grade or above. Schools may take these actions for students in the fifth grade or below.

The duties of a school district in responding to a student who has five or more unexcused absences are made discretionary rather than mandatory. A school district may, but is not required to: take certain steps when a student has five unexcused absences in a month; and file a truancy petition after seven unexcused absences in a month or 10 in a year.

The duties of a school and a school district when a 6- or 7-year-old child has unexcused absences, including the duty to file a truancy petition, are made discretionary rather than mandatory.

A school may provide notice of an unexcused absence to a parent by electronic mail, and may conduct parent conferences concerning unexcused absences by telephone or in person.

Cities, Counties, and Other Municipalities. Public Works Reporting to Auditor. The requirement that cities provide reports to the State Auditor on public works and the extent to which those works are performed by city employees is made optional rather than mandatory.

Prosecutors' Reports to Governor and Liquor Control Board.The requirement that county prosecutors provide annual reports to the Governor and the Liquor Control Board is eliminated.

Surplus County Property. The requirement that surplus real or personal property in the possession of a county be sold is modified to provide counties with discretionary authority to dispose of or recycle property valued at under $500.

Multi-Family Property Tax Exemption Reporting. The requirement that cities report to the Department of Commerce with information relating to the cost and rental of tax-exempt multi-family units is made optional rather than mandatory.

Local Government Reports on Bonds. The requirement that local governments provide annual reports to the Department of Commerce about outstanding bond debt is made permissive rather than mandatory. (Reporting by underwriters to the department is unchanged.)

Municipalities' Reports on Energy Conservation Measures. The requirement to provide reports on energy conservation measures through December 31, 2009, is repealed.

Valuation of Tax-Exempt Property. Except as otherwise provided in law, county assessors are not required to value tax-exempt public property. (Assessors must continue to value public property that is leased to private persons.)

Staff Summary of Public Testimony: PRO: This is just a small start to a process of reducing unfunded mandates imposed on local governments. The Legislature should avoid imposing new mandates, as well as reviewing existing mandates.

CON: Schools have found the mandatory reporting requirements on student truancy to be an effective tool to improve educational outcomes. These reporting requirements should be maintained.

OTHER: The truancy laws should be maintained, with truancy reporting by school districts as a mandatory obligation, not permissive. Schools care when students are truant, and this program, enacted by the Becca Bill, actually works to reduce crime, juvenile detentions, and educational outcomes. Mandatory reporting allows for early intervention with at-risk youth. Eliminating the mandatory reporting is tantamount to repealing the Becca Bill. Also, please retain the multifamily property tax exemption reporting requirement. This allows the state to track affordable housing efforts.