Federalism in the Obama Administration Thomas Gais Director The Rockefeller Institute of Government Skidmore College February 7, 2013

2 Federalism in the Obama Administration  Questions:  How have the relationships between the national and state/local governments—or their respective responsibilities and powers—changed during the Obama Administration?  In these current relationships and distributions of power, what are the challenges for effective governance?  Basic points:  Obama Administration has a large, activist domestic policy agenda, and that necessarily means that federalism is critical to its success, even if the Administration cares little about the value of federalism itself  Although its ways of acting on and through the federal system are not unprecedented, they are distinctive in approach and intensity.  But its effectiveness in working through state/local governments is challenged by several developments, including the state fiscal crisis, political polarization, and demographic shifts.

3 Role of states in U.S. domestic programs Public employment as percentage of labor force is neither high nor low compared to other nations

U.S. is distinctive in its reliance on state and local governments to implement domestic policies: Percent of all government employees working in state & local governments Rockefeller Institute of Government 4

State and local governments spend most of the money supporting domestic programs in the U.S. Domestic expenditures by different levels of government, Spending as percent of Gross Domestic Product (GDP) 1 st year of Obama Administration

While SLGs spend more, the national government raises more revenues: Government own-source revenues as percent of GDP, Rockefeller Institute of Government 6 National

National government assistance to state & local governments, as percent of GDP Rockefeller Institute of Government 7

Different levels of government spending money in different ways, but much overlap too Expenditures, by level of government, in billions of dollars (2010) FederalStateLocal Environment/natural resources Public safety Education Transportation Health Income support/public welfare1,

Major elements of Obama Administration’s assertive form of federalism 1)Will spend money—and lots of it 2)Can very assertive, perhaps “coercive” 3)Uses competition to make big changes 4)Exercises executive powers, esp. waivers 5)Opportunistic, in support of policy aims; i.e., does not support “federalism” as goal  Uses state discretion to advance policies through states  Uses state discretion to advance aims where national coalitions are blocked Rockefeller Institute of Government 9

Growing challenges to the U.S. federal system as a vehicle for policy change: 1) Weakening state revenue system: state government tax revenues, (in constant 2011 dollars)

In addition to decline in state revenues, greater volatility and uncertainty in taxes; budget pressures too Rockefeller Institute of Government 11

2) Another challenge for U.S. federalism: growing spatial mis-match between resources and needs. Population shifts (percent changes, by age, ) Rockefeller Institute of Government 12

Changes in where social needs are greatest: increasing number of low-income children live in South and Mountain states Rockefeller Institute of Government 13 Percent changes in number of low-income children (125 pct of FPL) since 1998 Sources: Census Bureau.

But the states where the most vulnerable children live have the smallest programs to support them Rockefeller Institute of Government 14 Education spending per child Social policy spending per child in poverty For more on these issues, see southwestern-states-and-the-federalism-problem southwestern-states-and-the-federalism-problem

3) Deepening divisions among states; growing polarization and divisions even at state level  Responses to welfare reform in 1990s vs. health care reform in 2010—rejection of health care exchanges  Republican governors have also turned down funding for high speed rail  Less pragmatism among governors, especially on the Right; fewer states have divided party government  Large regional differences in financial rules (tax and spending limits)—greatest in Western states Rockefeller Institute of Government 15

4) Federal assistance to states may be less, and less powerful  Federal assistance to state and local governments is, other than Medicaid, largely discretionary—and that will be under severe pressure  SC decision found a limit on the power of congressional appropriations in requiring states to carry out directives attached to the dollars; hard to know where the line will be drawn Rockefeller Institute of Government 16

The Rockefeller Institute of Government The Public Policy Institute of the State University of New York University at Albany 411 State Street Albany, NY Thomas L. Gais Director (518)