Federalism

Politics of Modern Federalism

GRANTS!

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Federalism

Federal Grants-in-aid• Grants show how political realities modify legal

authority. (Money changes everything!)

• A way for the federal government to get money into state hands without violating the Constitution.

Politics of Modern Federalism

Federalism

Federal Grants-in-aid

• Federal cash grants became popular in the early 20th Century, made possible by:• Federal budget surpluses resulting from tariffs.• Federal income tax increased revenues• Federal control of money supply (Federal Reserve could print

money.)

Politics of Modern Federalism

Federalism

Federal Grants-in-aid• Grant-in-aid system is popular with state & local

governments: they don’t have to tax.• For a state official, federal money is like “free”

money.

What’s not to like?

Politics of Modern Federalism

Federalism

Federal Grants-in-aid: Problem #1• It is politically difficult for the federal government to

spend money in one state without spending money in all states.

• Elected officials support each other’s programs. When money goes to one state, it usually goes to other states.

Politics of Modern Federalism

Federalism

Federal Grants-in-aid: Problem #2• Beginning in 1960s, federal money started to come

“with strings attached.”• Federal grants were targeted at national programs

rather than state needs.

Politics of Modern Federalism

Federalism

The Changing Purpose of Federal Grants to State and Local Governments

1960

2006

Federalism

Federal Grants-in-aidPolitics of Modern Federalism

Categorical Grants• Most federal aid is distributed to

states in form of categorical grants

• Can only be used for a specific purpose.

• Examples: building new airport, crime-fighting in certain areas, natural disaster relief.

Block Grants• Block grants: federal grants

given for more general purposes, broad policy areas

• Welfare, public health, community development, education

• States prefer block grants; designed to allow state to spend money as it sees fit

Federalism

Federal aid = federal controlPolitics of Modern Federalism

Conditions of Aid• Tell state governments what

they must do if they wish to receive grant money.

• “Strings attached”• Example: To receive federal

highway funds, states must raise their drinking age to 21.

Mandates• Federal rules that states or

localities must obey.• Generally have little or nothing

to do with federal aid.• States must comply with

mandates, even if they have to spend their own money (unfunded mandate).

Federalism

Federal aid = federal controlPolitics of Modern Federalism

Mandates• Most federal mandates concern

the environment and civil rights.• Examples: school bussing to

achieve desegregation• Most unfunded mandates

have concerned the environment.

• Example: Safe Drinking Water Act (1996)

Federalism

No Child Left Behind Act (2002)

• Requires states to regularly test students and show improvement in test scores or face a reduction in federal funding.

• Considered by some to be the most intrusive federal law on how schools operate.

• Proponents: national testing standards needed to improve American schools.

• 10% of school funding comes from federal government.• Schools must meet NCLB requirements to receive federal funding

(conditions-of-aid). • NCLB is a mandate.

Federalism

Federalism

DEVOLUTION: Beginning in the 1980s, many political leaders worked to return authority to state governments.

• 1980s: President Ronald Reagan supported returning power to the states

• Believed the national government was too big and too intrusive in people’s lives.

• Believed states were better at providing services.

• Cut federal grants and relaxed spending rules states had to follow.

Federalism

• 1994 elections: Contract with America—Republican campaign promise to achieve specific goals

• Central idea: devolution—returning power to states

• Reduce size and power of national government by eliminating costly federal programs.

The Devolution Revolution

Newt GingrichSpeaker of the House

1995-1999

Federalism

• Federal and state spending on most programs increased after 1996.

• Public support for devolution was not strong. Most people favor “shifting responsibility to the states,” but not if it means cutting programs they value.

• Resulted in more, not fewer, government rules and regulations.

Debriefing on Devolution

Federalism

• Do grant programs enable Congress to do what it pleases by bribing states into compliance?

• Or do these programs merely increase the likelihood of national policy uniformity? Is that good or bad?

• What would be the consequence if a state refused federal grant money?

• Does the system of grants-in-aid upset the balance of federalism designed by the Framers?

For discussion

Federalism

1. Why do states like federal grants?2. What is the difference between a block grant and a categorical

grant? Give an example (real or hypothetical).3. What is a condition-of-aid? Give an example (real or

hypothetical).4. What is a federal mandate?5. What do states not like about federal mandates?6. What is an unfunded mandate?

For review