1. Politics of Modern Federalism
GRANTS!
$$$$

2. Politics of Modern 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.

3. Politics of Modern 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.)

4. Politics of Modern 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?

5. Politics of Modern 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.

6. Politics of Modern 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.

7. The Changing Purpose of Federal Grants to State and Local Governments
1960
The Changing Purpose of Federal Grants to State and Local Governments
2006

8. Politics of Modern Federalism Federal Grants-in-aid
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

9. Politics of Modern Federalism Federal aid = federal control
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).

10. Politics of Modern Federalism Federal aid = federal control
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)

11. 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.

13. 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.

14. The Devolution Revolution
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 Gingrich
Speaker of the House

15. Debriefing on Devolution
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.

16. For discussion
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?

17. For review Why do states like federal grants?
What is the difference between a block grant and a categorical grant? Give an example (real or hypothetical).
What is a condition-of-aid? Give an example (real or hypothetical).
What is a federal mandate?
What do states not like about federal mandates?
What is an unfunded mandate?