8-4: Fiscal Federalism

Big Idea: Constitutionalism

Enduring Understanding: Federalism reflects the dynamic distribution of power between national and state governments.

Learning Objective: Explain how societal needs affect the constitutional allocation of power between the national and state governments.

Intergovernmental Relations Dual Federalism National and state governments remain supreme within their own spheres Cooperative Federalism National and state governments work together to complete projects Dual federalism is often called “layer cake” federalism. For example, the national government is responsible for foreign policy, while the states have exclusive responsibility for the public schools. Dual federalism characterized the relationship between the nation and the state governments until the advent of the New Deal during the 1930s. Cooperative federalism is often called “marble cake” federalism because of the blurred distinction between the levels of government. For example, the interstate highway program features a partnership in which national and state governments share costs and administrative duties. While the state and federal governments share the costs and administration, the state must follow federal guidelines.

Fiscal Federalism Refers to pattern of taxing, spending, and providing grants in the federal system Always cooperative Revenue sharing Grants-in-aid Categorical Specific, clearly defined purpose States must comply with regulations Block States have discretion Examples of categorical grants include money spent to build interstate highways and wastewater treatment plants. Categorical grants increase the power of the national government because states must comply with regulations. Much federal regulation is accomplished by the “strings” that are attached to categorical grants, such as nondiscrimination provisions. State and local agencies can obtain categorical grants only by meeting certain qualifications and by applying for the grants. The most common type of categorical grant is a project grant, awarded on the basis of competitive applications. Formula grants are distributed according to a formula based on factors such as population, per capita income, and percentage of rural population. Block grants give states broad discretion in how money will be spent. Examples include money given to the states for homeland security and community development.

Fiscal Federalism Overview Mandates Rule telling states what they must do to comply with federal guidelines May be funded, underfunded, or unfunded Regardless, states must comply with mandates Often viewed as an unfair, expensive imposition on state governments, even if they agree with the mandate Civil rights and environmental protection are the most common mandates. For example, state programs may not discriminate against people because of their race, sex, age, religion, or nationality. An unfunded mandate requires state and local governments to provide services without providing resources for those services. For example, the Handicapped Children’s Protection Act required public schools to build access ramps and provide special buses, but the act did not provide federal funds to pay for these additions.