The Future of Property Rights

by Nancie Marzulla

AFTER YEARS OF FALSE STARTS, the prospect for the passage of property rights legislation this fall is suddenly a possibility. More than a dozen property rights bills have come before Congress over the last five years, but most have failed to gain the critical support necessary to survive the perilous path through committee, floor debate and ultimate passage. This Congress, however, two companion bills seem poised to succeed.

Representative Elton Gallegly and Senator Paul Coverdell have sponsored nearly identical bills in their respective chambers that have significant bipartisan support. Indeed, the House version, the Private Property Rights Implementation Act of 1997, has more than 220 cosponsors, forty of whom are Democrats; while the Senate version, the Property Owners Access to Justice Act of 1997, has four Democrat cosponsors. The bipartisan support seems especially heartening considering the general lack of media attention that has been afforded to the issue of property rights.

Importantly, the Gallegly and Coverdell bills address the longstanding problem of “ripeness.” The Supreme Court ruled, in essence, that a plaintiff must exhaust all agency and state court remedies before proceeding to federal court in many property rights cases, leaving plaintiffs a nearly impossible task. These bills clarify this requirement and clear up a mess of contradictory and confusing lower court rulings based on the same issue. Specifically, these bills provide that a takings claim “ripens,” that is, it may be heard by a federal court, after one “meaningful” development application has been submitted and then denied, and after one waiver request or appeal to an administrative agency is rejected. Under these proposals, the plaintiff and government can avoid the endless negotiations and gamesmanship that is typically associated with property rights cases.

Two other bills receiving bipartisan support come from Senator Orrin Hatch and Representative Lamar Smith. Their bills address another confusing jurisdictional situation often referred to as the “Tucker Act Shuffle.” While district courts generally hold injunctive power, the power to declare regulations invalid lies with the Court of Federal Claims, which The Tucker Act of 1887 established specifically to adjudicate financial claims against the United States.

For a victim of a regulatory taking, where government actions raise both injunctive and compensation questions, this split in jurisdiction has been a disaster. Most plaintiffs struggle for years just to lock down a forum to hear their case. Typically, the government argues one court against the other, claiming that the case requires compensatory adjudication before the district court, or, conversely, claiming that it requires injunctive adjudication before the Court of Federal Claims. In most cases, the government uses the split in jurisdiction to litigate by attrition, slowly exhausting the resources of the plaintiff on procedural battles.

This practice has had a chilling effect on landowners who know that they cannot compete in a court system that is heavily tilted toward the biggest bidders. The Smith and Hatch bills make the field more fair by removing the competition between federal district courts and the Court of Federal Claims. In essence, the courts would no longer need to settle the question of jurisdiction before either invalidating a regulation or ordering just compensation to an owner for property taken. Each court would more clearly have the power to adjudicate either question. Property owners, while still needing to meet a strict burden of proof, at least would know that the deck was not stacked against them from the outset.

While other aspects of the Bill of Rights have gained widespread attention, property rights, as protected by the Just Compensation Clause of the Fifth Amendment, has not. This fact alone indicates the strength of the issue at the grass roots level. The property rights movement is rising almost entirely from local activity as a host of property owners have found themselves displaced or destitute as a result of government inaction. While elected representatives can, upon a second look, come to realize the justice of a cause, it is more likely that the growing support for property rights on Capitol Hill has more to do with the “restlessness of the natives” than it does with the efforts of bureaucrats, judges and politicians. In fact, progress on legislation has been so quick that it has “surprised opponents of the measures,” wrote the New York Times, “including Clinton administration officials who had considered the property rights issue dormant in Congress.”

And while the importance of the legislation remains the primary reason for its progress, two unrelated events have helped as well. First, the balanced budget agreement has produced the positive side effect of releasing property rights from the eclipse of the annual budget battle. In September, the House held four hearings on property rights or property rights related legislation, and this month the Senate has held two more. The on-going campaign finance reform hearings have also indirectly helped property rights legislation. These hearings have kept the administration’s public relations juggernaut focused on campaign finance issues and away from property rights. With the administration distracted, the facts about the issue have had a chance to slip out from under its heavy hand of misinformation.

Although these legislative measures will not finish the job of property rights reform, they are a necessary and crucial first step. Fixing the procedures for litigating in federal court will move us closer to effectuating the Fifth Amendment in the age of regulation. The next step is for Congress to set a clear standard that the courts may use to determine when regulatory enforcement becomes a taking. Also, and perhaps most importantly, Congress must pass legislation that installs accountability into the regulatory system, requiring agencies to recognize and stand responsible for any unconstitutional activities they perform.

On the whole, however, the news of the last few months has been exciting. In the constant ebb and flow of legislative trends, property rights has found itself riding the current wave of activity, as well it should. The fact that Capitol Hill is finally recognizing a fact obvious to all of us, that government rarely respects party affiliation when taking civil rights, means that property rights will only become more important as the years go by.

Ms. Marzulla is President and Chief Legal Counsel of Defenders of Property Rights.

Seducing the Samaritan

by Joe Loconte

WITH THE DECLINE OF THE WELFARE STATE, liberals and conservatives are trying to enlist private charities to help cure social ills seemingly immune to government antidotes. Better late than never. But plans to step up state and federal funding for these groups ignore the lessons of government’s experiment—begun in earnest in the 1960s—in bankrolling social service agencies.

I interviewed leaders at some three dozen private agencies in Massachusetts, representing a range of social services, most of them deeply dependent on government grants and contracts. What these providers reveal is that government support comes with government oversight. My study suggests that government is remaking providers in its own bureaucratic image:

1. Government funding causes organizational mission creep. This was the phrase used to describe the shift in the objectives of U.S. marines in Somalia: from delivering food to chasing down local warlords. For private agencies on the public dole, it means bending their agendas to secure contracts—allowing distant politicians and bureaucrats, rather than frontline workers, to set program goals.

Kristin McCormack, formerly of Federated Dorchester Neighborhood Houses, recalls a summer camp contract with the Department of Social Services. After years of struggling to help the DSS kids, McCormack told a state official her agency wanted to terminate the contract, that it simply didn’t fit their mission or resources. The DSS official reminded McCormack of the $2 million in day-care contracts her agency had with the state. She renewed the contract.

“It becomes almost like heroin,” says Ed Gotgart, President of the Massachusetts Association of Nonprofit Schools and Colleges. “You build your program around this assumpton that you can’t survive without government money.”

2. Government focuses on delivering services, not results. Bureaucrats excel at quantifying care: the number of clients counseled, beds provided, days spent in drug detoxification. But government contracts tend to ignor actual outcomes in people’s lives.

“Nobody gives a darn if the kid got better,” says Joyce Strom of the Massachusetts Society for the Prevention of Cruelty to Children, a leading recipient of family-service contracts. “All the auditors look at in my budgets is to see if I bought as many pencils and spent as much on gas as I said I did.”

Consider Boston’s Pine Street Inn, which provides food and housing to nearly a thousand men, women, and children each day. The shelter, largely dependent on HUD grants, places no work or education requirements on its residents. Even the no-drinking rule is qualified: some residents walk a few yards from the shelter to a “wet park,” a place where they can drink alcohol unmolested all day long, and return in the evening, no questions asked.

3. Government tends to secularize religious agencies. Faith-based providers cannot discriminate in hiring based on religious or sexual orientation, for example, once they tap into public-funding streams. But if staff members, and the faith they bring with them, do not help define a religious institution, what does?

The Salvation Army is long known for its Bible-based approach to rehabilitation. But under the Army’s state-funded programs, if clients hear a sermon on sobriety, it will be after hours and never from a state-paid counselor or program director. “Not as part of the job description would they do anything religious,” says Jeff Green, Social Service Coordinator for the Army’s Bay Area Centers. “That’s the minister’s role.” So to avoid church-state challenges, religious groups must divorce their government-funded acts of charity from explicit expressions of faith.

Sociologist Peter Berger, a longtime student of the impact of the modern secular state, warns that “he who sups with the devil had better have a long spoon.” It seems that for many private agencies under contract, their spoons are not long enough.

Now that state governments are exercising greater control over welfare policy, what can they do to make it easier for charities and other private agencies to help the needy? First, they should loosen their regulatory grip over these groups. They should allow private alternatives to state licensing agencies so that ex-drug addicts, for example—who may lack professional credentials—could counsel those struggling with addictions. They can reform liability laws to encourage medical professionals to donate time at free clinics.

Second, states should help shift the culture of caregiving by encouraging private agencies to get off the public dole. They could establish and encourage a combination of public and private vouchers for services, placing more decision-making power in the hands of consumers. They can create charity tax credits (modeled on legislation by U.S. Senator Dan Coats) that would help connect taxpayers to effective charites in their own backyards.

Until we shatter government’s monopoly over the compassion business, it will continue to seduce, and subvert, charitable groups under contract: “I think we’re going to lose the war, because the state controls all the money,” says Patrick Villani, Director of St. Ann’s Home in Metheun, Massachusetts. “And now they can develop exactly the kind of providers they want.”

Warnings like that are coming from some of the most politically honed providers in one of the nation’s most progressive states. Let’s hope they won’t be lost on those determined to offer effective help to the nation’s neediest.

Mr. Loconte is deputy editor of Policy Review and author of Seducing the Samaritan: How Government Contracts Are Reshaping Social Services, a new book published by the Pioneer Institute.

Another Look at the Balanced Budget

by Stuart Butler

ON AUGUST 5TH PRESIDENT CLINTON signed the balanced budget agreement. And although members of Congress are still congratulating one another on a job well done, there is little in the agreement that is particularly exciting for conservatives who were hoping for real innovation and change. It is interesting to note, however, that only 3 Democrats voted against the final bill compared to 12 Republicans. The difference in voting is emblematic of the dissatisfaction that conservatives should feel toward the newly enacted budget bill.

To begin with, liberals are able to celebrate the largest new health care program since Medicaid, as well as an unprecedented increase in federal spending for higher education. As if this were not enough, conservatives failed to address the very issues that they had claimed they would. Congress did not fix the structural problems associated with the Medicare entitlement program. This means that difficult decisions which need to be made regarding the Baby-Boomer problem have been pushed to a future Congress and a future administration. They also further complicated an already overly complicated tax system. Most disappointing, perhaps, is the prospect that the budget deal may actually stifle the progress made on welfare reform under the Welfare Reform Act of 1996. Looking at the budget bill more closely, we can see that there are three devastating assaults on welfare reform.

First, the budget bill gives the Clinton administration carte blanche authority to design an expensive new Welfare to Work program. With guaranteed funding of $3 billion, this program will fund primarily public-sector “job creation”; that is, it will create expensive public sector jobs for welfare recipients similar to those created under President Jimmy Carter’s Comprehensive Employment and Training Act (CETA). The new program is also highly prescriptive; funds may not be used for conservative initiatives. With lavish funding that would equal 7 percent of total AFDC costs, this new, liberal program could dominate and direct state welfare reform activities for the next five years–erasing many conservative reforms.

Second, the budget bill virtually abolishes the work requirements that were established in the 1996 Welfare Reform Act. Specifically, the 1996 Act contains performance standards that require states to reduce their AFDC caseloads or, if they fail to do so, to require a certain percentage of those recipients to work. The budget bill destroys these requirements by redefining work to include going to school or receiving training.

Finally, recipients of workfare assignments are henceforth classified as regular employees and subject to the Fair Labor Standards Act. This means that some 25 labor laws are applicable to workfare participants. Under the Clinton administration’s regulations then, a state wishing to make its AFDC recipients work would be required to hire the recipient in a formal public-sector job. Such a job would be subject to a union or government wage scale and Davis-Bacon rules. For example, if New York State required a welfare recipient to perform janitorial services in the public schools, it would have to pay that recipient about $20 per hour. By refusing to include language in the budget bill to overrule the administration’s regulations, Congress has effectively outlawed community service workfare.

Congress should make reversing the administration’s welfare changes its top legislative priority when it returns from August recess. But welfare reform is not the only area where the budget agreement falls short. Conservatives should also be apprehensive of some of the assumptions and circumstances which surrounded the entire balanced budget agreement.

We should, initially at least, be concerned that in order to reach this year’s budget agreement Congress had to abandon the spending levels that it had set fourth in its 1993 agreement. If Congress can renege on it’s 1993 agreement, what assurance do we have that the 106th Congress will not do the same? This is particularly alarming given that three-quarters of the deficit reduction is scheduled, under the current bill, to take place between the years 2000 and 2002. Furthermore, the current budget agreement assumes that there will be an increase in revenues while predicting a modest increase in deficit spending during the next fiscal year. In many ways then, the agreement was forged under very speculative budget policy.

Not everything in the agreement is bad. There are some positive provisions in it. Specifically, we should celebrate the much hoped for reduction in the capital gains tax and the introduction of a child tax credit. Although these are modest gains, they do represent a step in the right direction.

However, if the budget agreement is to move us closer to perpetually balanced budgets and significant tax reform, conservatives in Congress must continue to press for lower spending and a fairer, flatter tax system. Specifically, Congress should overrule the welfare reform changes made by the Clinton administration, cut wasteful spending on programs such as the National Endowment of the Arts, eliminate the estate and capital gains taxes, and implement significant, pro-growth tax reform by enacting a flat tax or national sales tax. Only when these programs become law should members of Congress congratulate themselves on a job well done.

Dr. Butler is Vice President and Director of Domestic Policy Studies and the Roe Institute for Economic Policy Studies at The Heritage Foundation.