Federalism in the
Obama
Administration
Thomas Gais
Director
The Rockefeller Institute
of Government
Skidmore College
February 7, 2013
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.
2
Role of states in U.S. domestic programs
Public employment as percentage of labor force is neither high nor
low compared to other nations
3
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, 1977-2010
24%
Spending
as percent
of Gross
Domestic
Product
(GDP)
1st year of Obama
Administration
22%
20%
State and Local
Governments
18%
16%
14%
12%
National
Government
While SLGs spend more, the national government raises more
revenues: Government own-source revenues as percent of GDP,
1977-2010
25%
National
20%
15%
10%
State & local
5%
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
0%
Rockefeller Institute of Government
6
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)
Federal
State
Local
Environment/natural resources
45
38
160
Public safety
56
68
160
Education
71
255
617
Transportation
93
161
90
909
444
131
1,706
65
46
Health
Income support/public welfare
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, 1995-2012 (in constant 2011 dollars)
In addition to decline in state revenues, greater
volatility and uncertainty in taxes; budget pressures too
Percentage Change in Real State Government Taxes & Real GDP vs. Year Ago
18%
15%
Real GDP
Real state tax revenue
12%
9%
6%
3%
0%
-3%
-6%
-9%
-12%
-15%
-18%
Sources: U. S. Census Bureau (Quarterly tax collections); Bureau of Economic Analysis (real GDP).
Notes:
(1) % changes averaged over 2 quarters; (2) No legislative adjustments; (3) Recession periods are shaded.
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, 2000-2010)
Rockefeller Institute of Government
12
Changes in where social needs are greatest: increasing
number of low-income children live in South and
Mountain states
10
Percent changes in number of low-income
children (125 pct of FPL) since 1998
5
Northeast
0
Midwest
South
-5
Mountain
Pacific
-10
-15
Sources: Census Bureau.
Rockefeller Institute of Government
13
But the states where the most vulnerable children live
have the smallest programs to support them
Education spending
per child
Social policy spending
per child in poverty
For more on these issues, see
http://www.firstfocus.net/library/reports/childrensouthwestern-states-and-the-federalism-problem
Rockefeller Institute of Government
14
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
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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 12203-1003
www.rockinst.org
Thomas L. Gais
Director
gaist@rockinst.org
(518) 443-5831