FUNDAMENTALS OF FEDERALISM
CH. 3
FISCAL FEDERALISM
• Fiscal Federalism: pattern of spending, taxing,
and providing grants in the federal system
• Federal government uses this power to enforce
national rules and standards
– Congress has two resources to work with when it
comes to influencing states to do what it wants:
authority and money $$$
– Categorical grants
– Block grants
– Unfunded mandates
NATIONAL MINIMUM DRINKING AGE
ACT
Fiscal Federalism
•
•
•
Defined: the pattern of
spending, taxing, and
providing grants in the
federal system.
The major way the
federal government has
grown in power is
through using money
as a manipulator.
Federal aid makes up
25% of state and local
governments and 16%
of the federal budget.
“He who pays the paper calls the tune”
GRANTS-IN-AID
• Money paid from one level of government to
another, 2 major types:
– Categorical Grants - target specific purposes and
“strings attached.” Very detailed
•
•
•
•
•
•
80% of all aid to state and local gov
Preferred by nat’l level
Formula and Project
Ensures state compliance and policy uniformity
Matching funds
Members of Congress receive credit when program target
effective
– Block Grants – given for broad, general purposes and
allow more discretion on how the money is spent (ex.
Welfare reform)
• Preferred by governors
• Most famous example is TANF – Temporary Assistance to Needy
Families aka Welfare Reform Act
WELFARE ACT
• Temporary Assistance for Needy Families (TANF) 1996
• DC set terms for cash aid to poor families with children but
states administer the program according to federal
specifications
• States have greater leeway in defining many of the rules,
qualifications, work requirements while still recognizing
federal provisions, limits on how long people can collect
• Welfare is not an entitlement is states run out
• Transferred the money to states as block grants
• Strings attached: head of family must work or lose benefit; lifetime
benefits limited to 5 years; unmarried mother < 18 only receive $ if stay
in school and live with adult; immigrants ineligible for 5 years
MANDATES
• A requirement that a state undertake an activity or provide a service
– They have no choice! Different from grants!
– Why would this cause a power struggle?
• Often times the states or local gov’ts have to pay the bill of the mandate set by
Congress OR it overturns existing state policy
• States no longer have the RIGHT to monitor or legislate
– Americans with Disabilities Act (1990)
– Civil Rights Act of 1964
CIVIL RIGHTS ACT OF 1964
• Outlawed discrimination based on race,
sex, religion, national origin in schools,
workplace, and public facilities
(Unfunded) Mandates
• Direct orders to state governments to do something.
• Specific policy requirements but does not provide a
way to pay for activities
• CONSEQUENCES: criminal or civil penalties or
promises to cut off other, often unrelated, federal
funds
• Little to no funding by the federal government; all
or most funding by the state governments.
• Examples:
– Clean Air Act
– ADA
ADA
• Prohibits discrimination based on disability
• Requires that buildings be made readily
accessible to the handicapped
• Compliance costs the states considerable
sums of money
• states must comply upon pain of financial
penalties
CROSS-OVER SANCTIONS
NEW FEDERALISM
• DEVOLUTION REVOLUTION
• Nixon-Reagan: give states more control
• “Our Federalism” - power of the federal government
is limited in favor of the broad
• Idea that American federalism is strengthened by a
partial shift in authority from the fed. Gov. to state
and local gov.
• powers reserved to the states.
• Goal: lessen federal domestic spending and give the
states more control over spending
NEW FEDERALISM
•
•
•
•
Began w/ budgetary pressures in 80’s
Fed. assistance slowed
More block than categorical grants
States take on more financial burden for
joint programs
• States have more authority, BUT also bigger
share of responsibility – programs under
funded