HOUSE • • ••• • • . No. 6133 LEGISLATIVE RESEARCH COUNCIL Report Reiative to GARCIA V. SAN ANTONIO METROPOLITAN TRANSIT AUTHORITY: The Decline and Fall of State Sovereignty September 30,1987 2 HOUSE ..... No. 6133 [Octo,ber 19: ORDER AUTHORIZING STUDY (House, No. 5415 of 1986) Ordered, That the Legislative Research Council be directed to investigate and study the impact of the 1985 United States Supreme Court decision, Garcia v. San Antonio Metropolitan Transit Authority, including therein the immediate and projected effects of the decision on the rights of states and of local governments; and to file the results of its research with the Clerk of the House of Representatives not later than the last Wednesday in May 1987 Adopted by: The House of Representatives, March 19, 1986 The Senate, in concurrence, March 26, 1986 On Le1 I Le1 I CI1 ...c; ...c; c; .... CH CH I 1 (House, No. 5570 of 1987) Ordered, That the time be extended to the last Wednesday of September in the current year whereby the Legislative Research Council is required to report on its investigation and study of (1) the impact of the Supreme Court decision, Garcia v. San Antonio Metropolitan Transit Authority (House, No. 5415 of 1986) and (2) alternative sentencing practices and policies in the Commonwealth and other jurisdictions (Senate, No. 1541 of 1987). Adopted by: The House of Representatives, May 26,1987 The Senate, in concurrence, May 28,1987 CH S ,}, CH ]i r 1987] HOUSE - No. 6133 3 CONTENTS Order Authorizing Study . . . . . . . . . . . Letter of Transmittal to the Senate and House of Representatives . . . . . . . . . . . . . . Letter of Transmittal to the Legislative Research Council . . . . . . Page 2 . CHAPTER I. INTRODUCTION 5 6 7 Statement of the Problem, . . . Statement of the Issues . . . ..... . Subverting the Founders' Intent . . . .. . 8 9 II CHAPTER II. GARCIA AT A GLANCE: FEDERALISM REDEFINED . . . . . . . . . . . 14 CHAPTERIU. CONSTITUTIONAL DEVELOPMENTS . 18 In Pursuit of "a more perfect union" . . . . The Congress, the States and the Supreme Court Early Landmark Cases . . . . . . . . The Tenth Amendment Rewritten . . . . The Supreme Court and the New Deal . . . . . . . . . . . .. . . CHAPTER IV. NATIONAL LEAGUE OF CITIES V. USERY: THE TENTH AMENDMENT RESUSCITATED . . . . . . . Setting the Stage . . . . . . . . . . . . . Maryland v. Wirtz . . . . . . . Congressional Amendments . . . , National League of Cities v. Usery . . . . . . CHAPTER V. THE PRELUDE TO GARCIA: THE NATIONAL LEAGUE OF CITIES DOCTRINE REFINED . . . . . 18 19 19 21 22 26 . .. . .. . 26 26 27 27 . .. 32 Hodel v. Virginia Surface Mining and Reclamation Association . . . . . . . . . . . . . . . . Federal Energy Regulatory Commission v. Mississippi . . . . . . . . . . . . . . . . United Transportation Union v. Long Island Railroad . . . • . . . . . . . . . 32 33 34 4 HOUSE - No. 6133 Equal Employment Opportunity Commission v. Wyoming . . Refinement or Retreat? . . . . . 19 [October .. . . . .. . 35 37 \ CHAPTER VI. GARCIA V. SAN ANTONIO METROTo POLITAN TRANSIT AUTHORITY: THE TENTH AMENDMENT LAID TO REST . . . ...... . Factual Background . . . . . . . . . District Court Disposition . . . . ..... National League of Cities Overturned . . . . . . . Mass Transit and Federal Funding . . . . . . . Difficulties Defining "traditional governmental " ......... . . f unctIOns Constitutional Checks on Federal Power A Court Divided . . . . . . . . . . . . . . Dire Consequences Forecasted . . . . 39 39 su th' 40 v. 41 41 42 44 . CHAPTER VII. IN THE WAKE OF GARCIA The Immediate Impact: State and Local Budgets on the Brink . . . . . . . . . . . . ... Congress to the Rescue: The FLSA Amended . . . The Broad Implications of Garcia: State Autonomy Threatened . . . . . . . . . . . . . . . . Responding to Garcia and the Decline of State Sovereignty . . . . . . . . . . Litigation . . . . . . . . . . . Reform Congressional Procedures Influence National Legislation . .' . . . . . . . Seek a Constitutional Amendment . . . . . . . Civil Resistance by State Officers . . . . 46 50 54 54 55 58 63 64 65 66 66 67 APPENDIX Draft of Proposed Executive Order on Federalism 70 \ 1987] HOUSE - No. 6133 5 LETTER OF TRANSMITTAL TO THE SENATE AND HOUSE OF REPRESENTATIVES To the Honorable Senate and House of Representatives: LADIES AND GENTLEMEN: The Legislative Research Council submits herewith a report relative to an investigation and study of the impact of the decision of the United States Supreme Court, Garcia v. San Antonio Metropolitan Transit Authority. Views expressed herein do not necessarily reflect the opinions of the undersigned members of the Council. Respectfully submitted, MEMBERS OF THE LEGISLATIVE RESEARCH COUNCIL SEN. ANNA P. BUCKLEY OF Plymouth, Chairman REP. FRANCIS G. MARA of Brockton, House Chairman REP. JAMES T. BRETT of Boston, Vice- Chairman SEN. JOSEPH B. WALSH of Suffolk/Norfolk SEN. JOHN F. PARKER of Bristol SEN. PETER C. WEBBER of Berkshire REP. WILLIAM J. FLYNN, Jr., of Hanover REP. WILLIAM P. NAGLE, Jr., of Northampton REP. CHARLES N. DECAS of Wareham REP. SHERMAN W. SALTMARSH, Jr., of Winchester 6 HOUSE - No. 6133 [October LETTER OF TRANSMITTAL TO THE LEGISLATIVE RESEARCH COUNCIL To the Members of the Legislative Research Council: MADAME AND GENTLEMEN: Senate, No. 5415 of 1986 directed the L~gislative Research Council to make an investigation and study of the impact of the decision of the United States Supreme Court, Garcia v. San Antonio Metropolitan Transit Authority. The Legislative Research Bureau submits herewith a report in accordance with the above order. Its scope and content have been restricted to statistical and fact-finding data, without recommendations. The report was prepared by Robert E. England of the Bureau staff. 1 d tl v B 11 a d d g g n Respectfully submitted, "n DANIEL J. FOLEY, Director Legislative Research Bureau o C 11 B d o s t] l( o d S1 11 1 er 1987] HOUSE - No. 6133 7 CHAPTER I. INTRODUCTION .n :n 1- f. Ir In response to a joint order of the Massachusetts General Court directing the Legislative Research Council to investigate and study the impact of the 1985 United States Supreme Court decision, Garcia v. San Antonio Metropolitan Transit Authority, the Legislative Research Bureau has prepared this report which examines the immediate and projected effects of the decision on the rights of state and local governments. The emphasis of the study, which seems particularly appropriate during this Bicentennial of the U.S. Constitution, is on the doctrinal developments in constitutional law that threaten to reduce state governments to mere administrative adjuncts of the federal government. The report begins with a glance back to the days in which the nation's fundamental document emerged. Debates during this period were laced with objections from citizens who feared that the new national government would extend its authority beyond the sphere of its enumerated powers. To ensure ratification, advocates of the Constitution pledged to amend it to protect the rights of states and individuals. The ten amendments which ensued comprise the Bill of Rights. The last of these amendments guaranteed that the powers not delegated to the national government would be reserved to the states or to the people. From this beginning, the report chronicles a series of landmark Supreme Court decisions, which through their broad interpretations of various constitutional clauses, sanctioned the federal government's aggressive exercise of its powers. These developments, which many constitutional scholars claim have reduced the Tenth Amendment to tl1etoric, have certainly drastically diminished the sphere of reserved powers left to the states. The report continues with a discussion of Congress' extension of the Fair Labor Standards Act (FLSA) in 1966 to certain state and local government employees. Although it gave its approval to the original extension of the FLSA, the Court delivered a landmark decision in 1976 when it ruled that further extension of the Act to state and local government would displace their freedom to "structure integral operations in areas of traditional governmental functions." The National League of Cities v. Usery holding established that there 8 HOUSE - No. 6133 [October 1~ indeed was a sphere of state sovereignty immune from the reach of federal regulatory action. The study then describes a series of subsequent Supreme Court decisions in which it became apparent that the Court had difficulties in determining exactly what activities fell within the purview of "traditional governmental functions." Having lost its vitality through these decisions, the doctrine expounded in National League of Cities was completely repudiated in 1985 when that holding was reversed by the Garcia decision. The Garcia ruling, which is. reviewed extensively in this report, stemmed from a Department of Labor advisory that the employees of the San Antonio Metropolitan Transit Authority were subject to the minimum wage and overtime provisions of the FLSA. The case eventually wound its way to the Supreme Court which held that the municipal operation of a transit system did not constitute a "traditional governmental function." The Court further ruled that attempts to draw boundaries of state regulatory immunity in those terms were not only unworkable but inconsistent "with established principles of federalism. "The Court stated that if there are to be limits on the power of the national government to interfere with state functions those restraints are to be found in the federal political process. According to the Court, that process ensures that laws that unduly burden the states will not be passed. Arguably overestimating "the solicitude of the national political process for the continued vitality of the states," the Court effectively removed itself as arbiter of disputes between the national and state governments and left the federal government as the sole judge of its own power. In conclusion, the report discusses the immediate effects of the decision and the amendments to the FLSA which Congress enacted in response to intense lobbying by state and local government officials. The broader implications to the role of the states in the federal system are also examined and a number of possible responses to strengthen their position are reviewed. fe it er th th Statement of the Problem The allocation of political power between a limited national government and autonomous individual states is the basis for the o al b( dI CC A to cc to IS1 di of 1987] HOUSE - No. 6133 9 federal system devised by the framers of our Constitution. In addition, it has been a topic of public debate since that constitutional framework emerged. Specifically, this debate concerns the boundaries between the two spheres of authority and the means to adjudicate the clashes that arise when the division between the two spheres is in dispute. On the one hand, there is the Constitution's Commerce Clause which authorizes Congress to regulate "interstate commerce" and which has been liberally construed so that the meaning of the phrase has grown dramatically - along with the range of activities subject to congressional regulation. On the other hand, there is the Tenth Amendment which reserves ,to the states those powers not delegated to the federal government and which - although at one time considered by the Court as a check on the federal government's power - has been reinterpreted through judicial doctrine in such a way as to remove all restraint. The controversy surrounding the Garcia v. San Antonio Metropolitan Authority Supreme Court decision focuses on those issues which have been at the center of the debate. No longer in the middle of this debate is the Supreme Court which, in its Garcia ruling, held that its earlier attempts at drawing boundaries around state activities not subject to congressional regulatory authority were unworkable and that it would remove itself as arbiter in such disputes because such a role was "inconsistent with established principles of federalism." The Court, in effect, said that the relation between the national government and the states is to be determined at the discretion of the national legislature. Statemen,t of the Issues From the controversy generated by the Garcia decision, a number of central issues have emerged: 1. The Tenth Amendment states that "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." a. Does the amendment afford the states any protection from federal regulations that directly displace core governmental functions and impinge upon fundamental attributes of state sovereignty? 10 2. HOUSE - No. 6133 b. Conversely, is the amendment meaningless rhetoric which leaves to the states only those powers they would retain without it - an amendment that added nothing to the original document but which was proposed only to allay fears that the new national government might seek to exercise powers it was not granted? c. Should the Tenth Amendment be regarded as though it said, "Such power as Congress elects not to exert may to that extent be left to state and local governments" ? The Garcia Court held that previous judicial attempts to define standards for determining whether a particular state governmental function should be immune from the reach of Congress' commerce power were "unworkable." The Court went further, however, and also declared such attempts to be contrary to the basic principles of our constitutional system. a. In rejecting the judiciary's role in guarding the states from federal overreaching, did the Garcia Court reject "almost 200 years of the understanding of the constitutional status of federalism"? b. c. 3. [October Did the Constitution's framers assume that limiting national power in order to protect the states would be a natural and legitimate function of the jUdiciary? Is the balancing of competing state and federal interests a function that is more properly left to the legislative branch? A central premise of the Garcia decision is that the political process will sufficiently protect the states from laws that would unduly burden them. a. Did the Court adopt a naive position that overestimates "the solicitude of the national political process for the continued vitality of the States"? s v o 11 P 1 P e tl a tl t4 a C 1 C F tc a / ( / "- ~r 1987] / . HOUSE - No. 6133 b. 11 Moreover, in asserting confidence in "procedural safeguards" inherent in the federal political process, did the Court ignore fundamental shifts in institutional and political arrangements that have weakened the ties between national political leaders and state and local interests? Subverting the Founders' Intent The key issue is whether the Constitution successfully protects the states from wholesale subordination to Congress. What the federal government was not meant to have is a generalized veto over any and all state undertakings. The preemptive capabilities of the Congress were to be limited to the exercise of delegated powers. I But today, under the commerce power, there is much greater federal intrusion into the affairs of state governments as well as those of private firms and individuals than ever occurred in the 19th Century. The Supreme Court has allowed this development by permitting the power of the Congress to regulate commerce to evolve from a limited end to a permissive means that justifies any end, and by being unable to restrict the incremental expansion of the definition of "commerce among the states".2 The states are not singled out for regulation but they are swept into the all-encompassing area of activity that is touched by interstate commerce. Yet the general principle at issue remains: states were meant to exist as sovereign governments within the general framework of the Constitution including the reserved powers of the Tenth Amendment. There is sufficient evidence from the records of the Constitutional Convention and the Federalist Papers to demonstrate that the Founders intended that the state governments were to exist in order to prevent the new and stronger national government from becoming a centralized tyranny.3 As one observer notes: The states that ratified the new Constitution certainly cannot be thought to have ratified a Constitution that preserved nothing significant for the states, since it was that fear which was raised during the ratification debates and it was that fear which the Federalists sought to put to rest. by their reassurances in The Federalist and by the first ten 12 HOUSE - No. 6133 [October 1~ amendments. Thus, even if the Tenth Amendment added no content to the Constitution, it embodied an articulated fear and. a concomitant promise regarding the limited powers of the national government. 4 In a recent essay written to commemorate the Bicentennial of the Constitution, William Bradford Reynolds, Assistant Attorney General for Civil Rights, commented on the drafting of the Bill of Rights in these words: " ... the NinthS and Tenth Amendments were understood to be linked. The Ninth reserved certain unspecified rights to the people, and the Tenth reserved certain unspecified powers to the states. Together, these amendments were meant to provide an obstacle to expansion of national authority. But what the founders put together, our generation has rent asunder. The amendments have been severed, the Ninth has been misread as a grant of increased power to the Federal judiciary, and the Tenth has been rendered essentially meaningless. As a consequence, we have experienced a radical enlargement of the national Government's power and control over not only our day-to-day lives, but also over the legitimate authority of the states".6 In Garcia, Reynolds added, "The Court effectively repealed the 10th Amendment all on its own".7 Is any of this a surprise to those who have studied the history of our Constitution and its development? One of the more revealing commentaries is that of Brutus, an Anti-Federalist writer who, in March 1788, argued that the proposed federal structure would bode ill for the preservation of the state governments: Perhaps nothing could have been better conceived to facilitate the abolition of the state governments than the constitution of the judicial. They will 'be able to extend the limits of the general government gradually, and by insensible degrees, and to accommodate themselves to the temper of the people .... [O]ne adjudication will form a precedent to the next, and this to a following one .... In this situation, the general legislature, might pass one law after another, extending the general and abridging the state jurisdictions, and to sanction their proceedings would have a course of decisions of the judicial to whom the constitution has committed the power of explaining the constitution. If the e: s( p t< gl I. 2. 3. 4. 5. 6. 7. 8. 1987] HOUSE - No. 6133 13 states remonstrated, the constitutional mode of deciding upon the validity of the law, is with the supreme court, and neither people, nor state legislatures, nor the general legislature can remove them or reverse their decrees. 8 Whether Brutus had a remarkable prescience or had sufficient experience with judicial review to predict a logical turn of events is secondary to the fact that the Founders, faced with this kind of prophecy, added the language in the Ninth and Tenth Amendments to safeguard the rights of the people and the powers of the State governments from this kind, of development. ENDNOTES I. Lawrence A. Hunter and Ronald 1. Oakerson "An Intellectual Crisis in American Federalism: The Meaning of Garcia," Federalism and the Constitution: A Symposium on Garcia, ACIR, Washington, D.C., 1987, p. 8. 2. Id. 3. Robert F. Nagel, "Federalism as a SUbject of Interpretation." Federalism, etc., supra, p. 30. 4. Nagel, supra, p. 27. 5. "The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people." 6. "Power to the People," The New York Times Magazine, September 13, 1987, p. 120. 7. Id.. p. 121. xv, 20 March 1788, The Anti-Federalist, ed. by Herbert 1. Storing (Chicago: The University of Chicago Press, Chicago, 1981), pp. 186-87. Cited by Hunter and Oakerson, supra, p. 14, note 28. 8. See, Essay 14 HOUSE - No. 6133 [October CHAPTER II. GARCIA AT A GLANCE: FEDERALISM REDEFINED Federalism can be defined as the constitutional allocation of power between the federal and state governments. It is a term also applied to the political values underlying that allocation. In 1971, the V nited States Supreme Court characterized federalism as a sensitivity to the legitimate needs of state governments. l Five years later the Court, in what appeared to be the ultimate proof of its sensitivity to the role of state government in the federal system, ruled in favor of state sovereignty in National League of Cities v. Usery.2 But the euphoria of the states was to be short-lived. Garcia v. San Antonio Metropolitan Transit Authority overturned the National League of Cities decision and, in the minds of many, reduced the states to mere administrative bodies. Certainly, in the wake of the Court's 1985 decision in Garcia, states and localities, now more than ever, are dependent upon the national government's sensitivity to their needs for protection against intrusive and burdensome federal statutory regulation. 3 The original issue in the Garcia case was whether the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA)4 applied to a publicly owned and operated mass transit system. The case originated as the result of an advisory by the V.S. Department of Labor that the San Antonio Metropolitan Transit Authority (SAMT A) was subject to the provisions of the FLSA. SAMT A sought and obtained declaratory relief from the federal district court whereupon the Department of Labor on its behalf and that of Garcia, a SAMTA driver, appealed directly to the Supreme Court. The appellants, Garcia, et aI., contended th~t regulation of the transit system's employment conditions fell within the purview of Congress' power under the Commerce Clause. 5 The appellees argued for governmental immunity under the Tenth Amendment which reserves to the states and to the people those powers not delegated to the national government by the Constitution. 6 The Court, however, did not confine itself to the narrow issue of whether the operation of such a system was exempt from federal regulatory law under the "traditional government function" test established in National League of Cities and refined in subsequent 1 d 1: 1 1: r v G r d 1: a r ( 1 c ~ t t s " s t ( ~ t 1 , ( ( 1 ~ s t t I r r i i 1 a ) f ; { t r t f I 1987] HOUSE - No. 6133 15 decisions. Instead, the Court, by a bare majority, "delivered a broadside decision" by flatly reversing itself and overruling National League of Cities. 7 As alluded to above, the latter caSe appeared to be a landmark decision in that the Court had recognized constitutional limitations on the federal government's power to regulate commerce when it impinges upon sovereign state functions. In National League of Cities, the Court had ruled that congressional enactments regulating commerce are unconstitutional whenever they "operate to directly displace the States' freedom to structure integral operations in areas of traditional governmental functions." 8 The Court also acknowledged its role as a check on Congress' exercise of power that might otherwise "devour the essentials of state sovereignty." 9 In overturning eight years of precedent, the Court declared in Garcia that the "traditional government function" test of National League of Cities had proven to be "unworkable in practice. "10 The development of a practicable and definitive standard for determining whether a particular government function should be immune from the reach of federal regulation under the commerce clause proved to be more than just an elusive task for the Court. Any attempt to make such distinctions, Justice Blackmun wrote for the majority, would be "inconsistent with established principles of federalism. "II States should pursue redress from overreaching federal regulatory action through the political and not the judicial process, according to the Court. The assessment of the Court was that state sovereignty interests were sufficiently protected from burdensome or intrusive federal laws by their representatives in Congress and by the role the states play in the federal electoral process. In a sharply worded dissent, Justice Powell described the majority's opinion as a radical departure "from long settled constitutional values ... [which]. . .ignores the role of judicial review in our system of government. "12 Justice Powell pointed out that, "The States' role in our government is a matter of constitutional law , not of legislative grace. "13 Rejecting the notion that the political process will shield states from federal encroachment, Justice O'Connor noted that, "With the abandonment of National League of Cities, all that stands between the remaining essentials of state sovereignty and Congress is the latter's underdeveloped capacity for self-restraint. "14 16 HOUSE - No. 6133 [October The immediate impact of the Garcia ruling was to subject state and local governments to the wage and hour provisions of the FLSA. The option of providing compensatory time-off for overtime work was thus virtually eliminated. The Department of Labor (DOL) calculated that if the FLSA had applied to state and local governments during calendar year 1984 the nationwide costs for compliance with the minimum wage and overtime provisions would have amounted to $396 million and $733 million, respectively. IS These calculations were based on the assumption that state and local governments would not make adjustments in the level or mix of services provided to the public. Turning to their representatives in Congress, state and local officials argued that the crushing financial burden on their already-strained budgets would result in reduced services, tax increases and public employee layoffs. In what has been viewed in some quarters as a vindication of the majority opinion in Garcia, Congress responded to intense lobbying by passing legislation amending, in some respects, the applicability of the FLSA to the states and their political subdivisions. Subject to certain prescribed conditions, public agencies were allowed to continue the widespread practice of providing "comptime." though now at the premium rate of one and one-half hours for each hour that overtime compensation is required. The DOL estimations were subsequently recalculated to reflect a cost of $216 million for state and local compliance with the FLSA's overtime provisions during the first calendar year they would apply. 16 The amendments did not alter the minimum wage requirements of the FLSA. The FLSA amendments notwithstanding, there is no question that the Garcia Court redefined the balance of power between the federal and state governments. The question that remains, however, is whether the states have been relegated, with respect to national policy making, "to little more than another special interest group. "17 Congress' quick response to the matter, according to one legal scholar, does not necessarily vindicate the Court's "political safeguards" theory: It does not mean, however, that Congress was responding to a perceived infringement on the states' prerogatives to choose which services they believe they need to provide, or how to structure the provisions of those services. The 1 I( J: I: I~ I~ I~ Ii 18 1987] HOUSE - No. 6133 17 amendments only vindicate the power of the states to win a single battle in a crisis atmosphere where the constituency on whose behalf Congress was acting - the employees themselves preferred certain exemptions from the coverage of the Act. What is not vindicated is the ability of the congressional, political process to preserve the institutional independence of the states as a check on the power of federal government. I8 ENDNOTES , 1. Younger v. Harris, 401 U.S. 37,44. 2. 426 U.S. 833. 3. 105 S.Ct. 1005. 4. 29 U.S.c. 201-219 (1982). 5. U.S. Const., Art. I, s. 8, cl. 3. 6. U.S. Const., Tenth Amendment. 7. William W. Van Alstyne, "The Second Death of Federalism," 83 Michigan Law Review 1709 (June, 1985) 8. 426 U.S. at 852. 9. [d. at 855, quoting Maryland v. Wirtz, 392 U.S. at 205 (1968) (Douglas, J., dissenting). 10. 105 S. Ct. at 1016. II. [d. at 1007; Justice Blackmun was joined by Justices Brennan, White, Marshall and Stevens. 12. [d. at 1023 (Powell, J., dissenting); Justice Powell was joined in his dissenting opinion by Chief Justice Burger and Justices Rehnquist and O'Connor. Justice Rehnquist also filed his own dissent. A third dissent by Justice O'Connor was joined by Justices Powell and Rehnquist. 13. [d. at 1026 (Powell, J., dissenting). 14. [d. at 1037 (O'Connor, J., dissenting). 15. 51 F.R. 25710 (July 16, 1986). 16. 52 F.R. 2011 (Jan. 16, 1987). 17. The Status of Federalism in America: A Report of the Working Group on Federalism of the Domestic Policy Council (Nov. 1986) at 3. 18. Zoe Baird, "State Empowerment After Garcia,"18 Urban Lawyer 49 I, 513 (Summer, 1986). 18 HOUSE - No. 6133 [October CHAPTER III. CONSTITUTIONAL DEVELOPMENTS In Pursuit of Ha more perfect union" Two centuries ago, delegates from the original states assembled in Philadelphia to consider revising the Articles of Confederation which had been the ruling document of the Union since 1781. In their quest for "a more perfect union," the delegates abandoned the deficient Articles as reforms of a more fundamental nature emerged. The new governmental charter which was adopted instead was a product of compromise between delegates favoring a strong centralized government and others who were concerned that the states' viability as political entities was threatened. Acutely sensitive to the dangers of concentrating power in a central authority, the Framers devised a federal system of government under which the national government would be limited to certain enumerated powers relating to matters such as war and interstate and foreign commerce. Despite assurances from James Madison that "the powers delegated by the proposed constitution to the Federal Government are few and defined," vociferous opposition was mounted against the document.! The objections of the" Antifederalists" were based on fears that the new national government would extend its authority beyond the sphere of its enumerated powers. During the heated ratification process Massachusetts narrowly endorsed the new Constitution but recommended that the states and their citizens be protected from federal encroachment by the addition of a bill of rights. Seven other states followed Massachusetts' lead in voting for the Constitution only after proposing amendments to be adopted after ratification. The Federali~ts eventually conceded that such provisions were necessary. Ten amendments approved by the first Congress were subsequently ratified by the states to comprise the Bill of Rights. The Tenth Amendment states that "The powers not delegated to the United States by the constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people." In spite of such a clear assertion of the independent status of the states, their reserved powers have gradually been usurped by the federal government's aggressive exercise of its enumerated powers. This continuously increasing exercise of national authority, however, 1 w T el C tl n; c n; C til th cc th C re o s1; to cc St m Ie; p( ra 1987] HOUSE - No. 6133 19 would not be possible without the acquiescence of the Supreme Court. The Court's expansive in~erpretations of the federal government's enumerated powers combined with its broad reading of the Constitution's Necessary and Proper Clause 2 in which the ends justify the means have produced a constitutional paradox.3 The Tenth Amendment notwithstanding, the effect of these developments has been to remove any constraints against the intended limited national government when it acts in relation to the states. The national government, it would appear, is equipped to do whatever Congress deems proper, provided it does not run afoul of some express constitutional prohibition. S\gnificantly, with the National League of Cities doctrine now discarded, the Supreme Court has refused to define any such constitutional limitations with respect to congressional action affecting the states. 4 The Congress, the States and the Supreme Court Through broad interpretations of various constitutional provisions the Supreme Court has, in effect, ratified the expanded power of the national government. The doctrinal developments of the Commerce Clause, the Necessary and Proper Clause, the Supremacy ClauseS and the Tenth Amendment are particularly relevant to any discussion of the Garcia decision. f r I Early Landmark Cases The Commerce Clause gives the Congress the power to "regulate commerce with foreign nations, and among the several states, and with the Indian tribes." One of the foremost reasons for calling the Constitutional Convention in 1787 was to address the problems resulting from the proliferation of state-created trade barriers. 6 qppressive restrictions imposed by states on trade involving other states had fostered a hostile climate for commerce. It was necessary to vest the federal government with the power to regulate interstate commerce, according to Madison, in order to insure the "relief of the States which import and export through other States from the improper contributions levied on them by the latter. ''7 The debates leading up to the adoption of the Constitution suggest that Congress' power over interstate commerce was to be limited. In fact, the preratification debates indicate that the national legislature's power in ------~-------------------- 20 -- HOUSE - No. 6133 [October this regard was intended to be confined solely to the elimination or control of state-imposed trade restrictions. 8 Regardless of the Framers' intentions, the meaning of "interstate commerce" has grown considerably, along with the scope of state activities subject to federal regulation. It is not surprising then that the Supreme Court would describe the Commerce Clause as "one of the most prolific sources of national power. ''9 The first Supreme Court case involving the Commerce Clause arose in Gibbons v. Ogden.1O In this 1824 case involving rival steamboat operators, the Court struck down a New York law which granted Aaron Ogden the exclusive right to operate between New York and New Jersey because it conflicted with a federal statute. Chief Justice Marshall declared, "the act of Congress ... is supreme; and the law of the state, though enacted in the exercise of powers not controverted, must yield to it. "11 Marshall, in effect, was restating the doctrine he had pronounced five years earlier in McCulloch v. Maryland,12 the case usually cited as "establishing the supremacy of the national government within its delegated sphere of authority. "13 In Gibbons v. Ogden, the Court also took the opportunity to expand the meaning of commerce beyond the restrictive definition of "to traffic, to buying and selling, or to the interchange of commodities. "14 The definition given "commerce" by the Chief Justice was broad enough to include all business dealings within its meaning. IS The Chief Justice also noted that congressional regulation of commerce was constitutionally valid even if the commerce in question was conducted internally within a state but which nonetheless had an effect on another state. 16 In addition to broadly defining "commerce," Chief Justice Marshall applied equally liberal construction to the meaning of "regulate." Consistent with his expansive McCulloch interpretation of the Necessary and Proper Clause, he acknowledged in Gibbons virtually no limitations to Congress' power to regulate. Describing the scope of the federal government's powers in McCulloch, the Chief Justice had written: ... Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consistent with the letter and spirit of the constitution, are constitutional. 17 1~ ac IiI di be re M th de co m reo th st~ pr of C< of su thl as Su do 1987] r e e It If e It d d e N l, e e II o ,f ,f :e 15 ,f n n 11 " y Ie :e HOUSE - No. 6133 21 F or virtually the remainder of the nineteenth century, congressional regulatory legislation governing commerce: was rarely enacted. Supreme Court decisions involving the Commerce Clause during that period were largely confined to cases concerning state legislation purporting to curtail interstate commerce. The dormant federal sovereign awoke from its regulatory slumber, however, upon passage of the Interstate Commerce Act of 1887. 18 With the enactment of that law based on the Commerce Clause, Congress began its everexpanding foray in the field of commerce regulation. Congress' exercise of its legislative authority armed it with an affirmative and powerful "influence over American law and life. "19 The Tenth Amendment Rewritten Following Chief Justice Marshall's death, in 1835, the Court adopted a narrower definition of interstate commerce which was limited to commerce involving the physical crossing of state lines. It did not matter that commerce remaining within a state had impact beyond its borders. Moreover, in the post:..Marshall era, the Supreme Court reconsidered the meaning of the term "regulate." In the view of the Marshall Court, the power to regulate commerce was recognized as the "power to limit and restrain it at pleasure. "20 If the Court determined that what was at issue was, in fact, a regulation of commerce, then it was valid under Congress' plenary power. The motives for the exercise of that power were irrelevant. Such a broad reading of Congress' power to regulate, however, was cast aside by the Court in 1918 with its decision in a child labor case. Hammer v. Dagenhart 21 involved the constitutionality of a federal statute forbidding the transportation in interstate commerce of the products of mines or factories which employed children in violation of the standards established in the Child Labor Act of 1916. 22 The Court ruled that while the law in question was within the confines of Congress' commerce power, the real purpose of the act was to suppress child labor through the regulation of manufacturing. Under the Court's restrictive interpretation, manufacturing was not deemed as commerce which could be reached by Congressional authority. Such regulation was within the scope of state authority. Significantly, the Court invoked language from a ruling it handed down fifty years earlier in Lane County v. Oregon. 23 As it had done - - - - - - - - - - 22 HOUSE - No. 6133 [October in that 1868 decision, the Hammer Court framed the sphere of state authority in language far less ambiguous than that of the Tenth Amendment. In each instance, the inclusion of a single adverb not found in the text of the amendment revealed the philosophy embraced by the Court. Virtually echoing the Lane ruling, the Hammer opinion declared that: In interpreting the Constitution it must never be forgotten that the Nation is made up of states to which are entrusted the powers of local government. And to them and to the people the powers not expressly delegated to the National Government are reserved. The power of the States to regulate their purely internal affairs by such laws as seem wise to the local authority is inherent and has never been surrendered to the general government. 24 (emphasis added) With the addition of the word "expressly," the complexion of the Tenth Amendment had been dramatically altered. The broad interpretation invigorated the amendment as an instrument that could be used by the states in fending off an aggressive national government that had abandoned its doctrine of laissez faire. The Supreme Court and the New Deal In response to the devastation wrought by the Great Depression of the 1930s, President Roosevelt pushed a profusion of far-reaching and novel measures through Congress. The conservative court, however, soon invalidated most of the new laws. Its appraisal that the measures unlawfully interfered with the states' exclusive power over intrastate commerce was prominent among the various constitutional objections voiced by the Court. Stymied in his recovery and relief attempts, and emboldened by his overwhelming electoral victory in the 1936 election, Roosevelt proposed in 1937 to alter the composition of the Court by providing retirement at full pay for all justices over the age of seventy. An "assistant justice" with full voting rights was to be appointed for each member refusing to accept retirement. Congress balked at the plan which critics characterized as "packing the court" and it was abandoned in July. Nonetheless, there followed a sudden inclination by the Court to look at New Deal proposals in a favorable light which prompted wags to revise an old proverb by asserting that "a switch ( ( I ~ ( t I t 1 t r ~ s t r a t a a a 1987] .e h It d n e j j t 1 t r t , 1 1 1 1 1 HOUSE - No. 6133 23 in time saves nine." However, given the 5-4 decisions by which some of Roosevelt's initiatives were thwarted and the appointment of two new members in April, it would be a dubious claim to attribute the Court's turnabout, which soon followed the President's proposal,to the members' self-interests. With the changed composition of the Court, the immediate impact was a swing to a more liberal interpretation of the Commerce Clause. The Court's 1937 decision in National Labor Relations Board v. Jones and Laughlin Steel CO.,25 upheld a comprehensive labor statute 26 and restored to Congress the sweeping commerce power that it had been denied since the Hammer. rUling. Once more, manufacturing was within the reach of the federal government's power to regulate commerce. Such authority was soon extended to other productive industries such as agriculture and mining. Only the year before in Carter v. Carter Coal CO.,27 the Court had ruled that the mining of coal did not constitute "commerce" and was thus immune from federal commerce regulation. The Jones and Laughlin decision marked the Supreme Court's return to Chief Justice Marshall's broad conception of federal power. The ruling, however, did not remove all limits on the national government's commerce power. While Tenth Amendment restrictions on that power were accorded little relevance, the Court did require that the activity being regulated must have a "close and substantial" relationship to interstate commerce. 28 The Court would not extend to Congress such far-ranging power "so as to embrace effects upon interstate commerce so indirect and remote that to embrace them ... would effectually obliterate the distinction between what is national and what is local and create a completely centralized government."29 Nonetheless, the Jones and Laughlin ruling was ~ignificant for it "permitted Congress to legislate in many areas where the States previously had exercised exclusive control." 30 While Jones and Laughlin and a series of subsequent decisions repudiated the Hammer Court's federalism theory, it was not until a 1941 decision that the Hammer ruling was overturned. At issue in the landmark case of United States v. Darby 31 was the constitutionality of the Fair Labor Standards Act of 1938. The FLSA authorized a federal agency to set minimum wages and maximum hours. The act also prohibited the shipment in interstate commerce of commodities 24 HOUSE - No. 6133 [October produced by employees whose wages and hours were in violation of the prescribed standards. The Court was urged to invalidate the statute on the grounds that while the prohibition was ostensibly a regulation of commerce, in fact, its actual purpose was to regulate labor conditions. It was argued that under the guise of interstate commerce, the federal government was usurping one of the powers reserved to the states under the Tenth Amendment. In this case it was the authority of the state of Georgia to leave wages and hours unregulated. Unlike the Hammer Court, which examined the motives of the Child Labor Act, the Darby Court found such consideration irrelevant. The Court declared that the motive and purpose of interstate commerce regulations are matters deferred to legislative judgement. The Court returned to the doctrine Chief Justice Marshall annunciated in Gibbons v. Ogden: 32 aside from any constitutional limitations, Congress' power over interstate commerce was absolute and could be exercised regardless of the reason. In writing for the Court, Justice Harlan Stone noted that its conclusions were unaffected by the Tenth Amendment: The amendment states but a truism that all is retained which has not been surrendered. There is nothing in the history of its adoption to suggest that it was more than declaratory of the relationship between the national and state governments as it had been established by the Constitution before the amendment or that its purpose was other than to allay fears that the new national government might seek to exercise powers not granted, and that the states might not be able to exercise fully their reserved powers.33 , Attempts to limit the scope of Congress' commerce power were abandoned by the Supreme Court the next year. In the 1942 Wickard v. Fi/burn 34 decision, the Court ruled that the Agricultural Adjustment Act of 1938 extended to produce not grown for commerce but for a farmer's personal consumption and for feed for his poultry and livestock. The Court contended that the fact that the farmer's "contribution to the demand for wheat may be trivial by itself is not enough to remove him from the scope of federal regulation. "35 It was thus asserted that Congress is vested with the authority to regulate 1 f I ( .( s ( l 1987] HOUSE - No. 6133 25 activities that are undeniably trivial and purely local in matter so long as there is an effect on interstate commerce ~. however indirect that effect may be. The Court's reasoning essentially freed Congress to regulate any activity. With the Wickard ruling, the Court had culminated the expansion of the definition of commerce that had commenced with the Jones and Laughlin decision. The latter case, significantly, marked the beginning of a period of Supreme Court deference to Congress' commerce power that continued uninterrupted until the landmark 1976 National League of Cities opinion. , ENDNOTES I. 2. 3. 4. 5. 6. 7. 8. 9. 10. II. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. The Federalist Papers, No. 45 at 292 (c. Rossiter ed. 1961). U.S. Const., Art. I, sec. 8, cl. 18. The Status of Federalism in America, supra, at 13. Advisory Commission on Intergovernmental Relations (ACIR), (Feb., 1986), Reflections on Garcia and its Implications for Federalism, at 28. U.S. Const., Art. VI, sec. 2. The Status of Federalism in America, supra, at 21; Bernard Schwartz, A Commentary on the Constitution of the United States, (1977), Part I, Volume I at 179. The Federalist Papers, supra, No. 22 at 144. The Status of Federalism in America, supra, at 21; Garcia, 105 S. Ct. at 1029 (Powell, J., dissenting). Hoods and Sons v. Dec Mond, 336 U.S. 525,533-34 (1949). 22 U.S. (9 Wheat.) I. Id. at 21 I. 17 U.S. (4 Wheat.) 316 (1819). Advisory Commission on Intergovernmental Relations (ACIR), (Apr., 1986), A Framework for Studying the Controversy Concerning The Federal Courts and Federalism at 15. 22 U.S. (9 Wheat.) at 189. Schwartz, supra, at 18t. 22 U.S. (9 Wheat.) at 194. 17 U.S. (4 Wheat.) at 421. Paraphrasing Schwartz, supra, at 179. Wickard v. Fi/burn, 317 U.S. Ill, 121 (1942). 22 U.S. (9 Wheat.) at 227. 247 U.S. 251. 39 Stat. 675. 7 Wall. 71 (1868). 22 U.S. (9 Wheat.) at 275, emphasis added. 301 U.S. I. National Labor Relations Act of 1935. 298 U.S. 238 (1936). 301 U.S. at 37. /d. Status of Federalism, supra, at 26. 312 U.S. 100 (1941). 22 U.S. (9 Wheat.) 1 (1824). 312 U.S. at 124. 317 U.S. II I. 35. Id. at 127. 26 HOUSE - No. 6133 [October CHAPTER IV. NATIONAL LEAGUE OF CITIES V. USERY: THE TENTH AMENDMENT RESUSCITATED Setting the Stage Maryland v. Wirtz When the FLSA was enacted in 1938, states and their political subdivisions were specifically excluded from the Act's definition of "employer." Congress amended the Act in 1966, however, and extended its coverage to employees of schools, hospitals and institutions operated by states and their subdivisions. l The amendments also extended coverage of the FLSA to state-owned or regulated mass transit company employees, although the overtime provisions of the Act remained inapplicable to drivers, operators and conductors. The constitutionality of the 1966 amendments was challenged in the 1968 Maryland v. Wirtz case. 2 The plaintiff contended that the expansion of the coverage was beyond the scope of Congress' power since the amendments would interfere with sovereign state functions. The Court, however, found no interference with state functions per se. According to the Court, the employees in question were engaged in economic activities within the meaning of the "enterprise concept" described in the FLSA amendments. The Court reasoned that when a state acts as an employer in functions such as those specified in the amendments, the state is "subject to the same restrictions as a wide range of other employers whose activities affect commerce, including privately operated schools and hospitals." 3 In reaching its decision, the Court dismissed the contention that Congress' regulatory power over commerce "must yield to state sovereignty in the performance of government functions." 4 The Court ruled that an "otherwise valid regulation of commerce" is unaffected by the fact that it conflicts with "countervailing" state interests. 5 The minority in Wirtz argued that the federal government cannot "interfere unduly with the state's performance of its sovereign functions of government." 6 Justice Douglas, in writing the dissent, noted that the amendments would impose burdens on the states that would require them to alter their fiscal policies. States, in his view, 1 VI o g l' tl ( tl a t( Ie sl tl L st c( S re fe S· al tc re h: 1987] .. HOUSE - No. 6133 27 would need to raise taxes, to adjust the levels of services they offer, or to refrain from implementing initiatives in new fields of governmental activity. In addition, he cited the danger that "the National Government could devour the essentials of state sovereignty, though that sovereignty is attested by the Tenth Amendment." 7 al of Congressional Amendments ld ld Emboldened by the Wirtz decision and "evidently encouraged by three decades of judicial winking," 8 Congress enacted a number of amendments to the FLSA in 1974 that extended coverage of the Act to virtually all employees of state and local government. 9 The national legislature had decided that the states and their political subdivisions should be required to operate under the same wage and hour standards that applied to private employers. le ::>r le ld m le er lS. er ~d t" ~n le Ie 19 at te rt ~d at ~n It, at TV, National League of Cities v. Usery In response, a number of cities and states, along with the National League of Cities and the National Governors Conference, filed suit against the U. S. Secretary of Labor in the federal district court for the District of Columbia. The plaintiffs challenged the validity of the 1974 amendments and sought declaratory and injunctive relief. A district court panel granted the Secretary of Labor's motion to dismiss the complaint "for failure to state a claim upon which relief might be granted. "10 The panel, however, was "troubled" by the plaintiffs' assertions that the amendments represented an intrusion upon the states' ability to perform "essential governmental functions. "II The court considered their contentions substantial and noted that the Supreme Court might deem it appropriate to retreat from the "farreaching implications" of the Wirtz decision. 12 Nonetheless, the court felt obliged to apply the latter holding to the case before it. The district court's assessment proved to be prophetic as the Supreme Court agreed that the states' contentions were substantial and accepted the case upon appeal. In fact, the high court went on to decide that the "far-reaching implications" of Wirtz warranted overruling of that opinion and the district court's decision was reversed.13 In overturning the Wirtz decision by a 5-4 vote the court had derailed major congressional economic legislation for the first 28 HOUSE - No. 6133 [October time "since the judicial attack on the New Deal." 14 The appellants in National League of Cities contended that the Tenth Amendment prohibited Congress from exercising its commerce power to the extent that it was dictating the terms of internal state operations. The appellee argued that the FLSA amendments would no more curtail the sovereignty of the st,ates than previous Supreme Court decisions upholding sweeping exercises of congressional authority. The Court was not persuaded by the latter argument, noting that those exercises to which the appellee referred involved federal action preempting state regulation of the private sector. The Court declared that: It is one thing to recognize the authority of Congress to enact laws regulating individual businesses necessarily subject to the dual sovereignty of the government of the Nation and of the State in which they reside. It is quite another to uphold a similar exercise of congressional authority directed, not to private citizens, but to the States as States. 15 In writing the Court's opinion, Justice Rehnquist 16 did not explicitly cite the Tenth Amendment when he pointed out that the Court had repeatedly acknowledged that there are attributes of state sovereignty which Congress may not impair, "not because Congress may lack an affirmative grant of legislative authority to reach the matter, but because the Constitution prohibits it from exercising the authority in that manner." 17 While it has been suggested that Justice Rehnquist "carefully avoided tying his doctrine to the Tenth Amendment," 18 he pointed out that the Court had recognized only a year earlier that the amendment represented an express declaration limiting Congress' commerce power to regulate "the activities of the States as States." 19 Rehnquist quoted a passage from the Court's 1975 opinion in Fry v. United States:20 While the Tenth Amendment has been characterized as a 'truism,' stating merely that 'all is retained which has not been surrendered,' 21 it is not without significance. The Amendment expressly declares the constitutional policy that Congress may not exercise power in a fashion that impairs the States' integrity or their ability to function effectively in a federal system. 22 1 ( f I 1 ( ( I <: c JI d ~r le :e ;e d .e II Lt n d y I y 1 t 1 t 1987] HOUSE - No. 6133 29 The states' power to determine the wages and hours of their employees was described by the Court as an "undoubted attribute of state sovereignty." 23 Citing examples advanced by the appellants, the Court noted the adverse effects on state and local governments which would result from compliance with the amended FLSA. The Court considered not only the increased costs in terms of dollars but also with regard to the reduction or elimination of services to the "citizens who depend upon those governments. ''24 In the view of the Court, however, precise assessments of actual impact were not crucial to the resolution of the issue before it. The majority was satisfied that the FLSA amendments would, "impermissibly interfere with the integral governmental functions" of states and political subdivisions: 25 For even if we accept appellee's assessment concerning the impact of the amendments, their application will nonetheless significantly alter or displace the States' abilities to structure employer-employee relationships in such areas as fire prevention, police protection, sanitation, public health, and parks and recreation. 26 These particular governmental activities were cited by the Court as being typical of the services that states and localities have "traditionally afforded their citizens. "27 The Court agreed with Justice Douglas who, in his Wirtz dissent, cautioned against congressional assertions of power that directly displace the ability of the states to choose how to structure their services. Douglas feared that such exercises of power threatened to cripple the ability of the states to make decisions regarding "functions essential to [their] separate and independent existence." 28 According to the Court, the FLSA amendments represented a direct displacement of the freedom of the states "to structure integral operations in areas of traditional government functions." 29 Dismissing the reasoning of the Wirtz majority, the National League of Cities Court overruled that 1968 decision and held that the challenged amendments were outside Congress' commerce power. Dissenting opinions were written by Justice Brennan who was joined by Justices White and Marshall, and by Justice Stevens who dissented separately. Justice Brennan's dissent was a stinging rebuke of the majority's 30 HOUSE - No. 6133 [October repudiation of "principles governing judicial interpretation of our Constitution settled since the time of Mr. Chief Justice John Marshall." 30 Brennan scolded his brethren for discarding Marshall's "postulate that the Constitution contemplates that restraints upon exercise by Congress of its plenary commerce power lie in the political process and not in the judicial process." 31 In Brennan's view, the majority opinion was unfaithful to a principle that was annunciated by Marshall in 1824. 32 He denounced his colleagues for their "purported discovery in the Constitution of a restraint derived from sovereignty of the States." 33 Characterizing the majority's reasoning as a weak disguise to cover their disdain for a congressional decision, Brennan reminded the Court that our system of government reserved policy judgements to Congress and condemned the Court's rejection of a long and "unbroken line of precedents. "34 Justice Stevens' dissent was written in a different vein. Stevens was in agreement with many of the positions advanced by the majority and had "a great deal of sympathy" for the views it expressed. 35 Nonetheless, he could identify no limitations on the federal government's reach in this instance "that would not also invalidate federal regulations of state activities that I consider unquestionably permissible." 36 Like Justice Brennan, Stevens felt that the states must seek redress through political and not judicial channels. ENDNOTES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 29 U.S.C. s. 203(s) (5). 392 U.S. 183. [d. at 193. [d. at 195. [d. at 195-197. 392 U.S. 182, 205 (Douglas, J., dissenting), quoting New York v. United States, 326 U.S. 572, 587 (1946), (Stone, C. J., concurring); Justice Douglas was joined in his dissent by Justice Stewart. [d. at 205. Van Alstyne supra, at 1712. Fair Labor Standard Amendments of 1974, Pub, L. No. 93-259, 88 Stat. 55. 426 U.S. at 833. [d. at 839. [d. [d. at 840. Joseph F. Kobylka, "The Court, Justice Blackmun, and Federalism: A Subtle Movement With Potentially Great Ramifications," 19 Creighton Law Review 9, 24 (1985), quoting C. H. Pritchett, Constitutional Law of the Federal System, at 234 (1984). 426 U.S. at 845. 1 r r tl S tl .1 e j r 1 g " j 1 s y 5 1 .'" '{ t 1987] HOUSE - No. 6133 31 16. Justice Rehnquist was joined by Chief Justice Burger and Justices Stewart and Powell. Justice Blackmun concurred separately. 17. 426 U.S. at 845. 18. Martha A. Field, "Garcia v. San Antonio Metropolitan Transit Authority: The Demise of a Misguided Doctrine," 99 Harvard Law Review 84 (1985). 19. 426 U.S. at 842. 20. 421 U.S. at 547 n. 7 . 21. United States v. Darby, 312 U.S. 100, 124 (1941). 22. 426 U.S. at 842. 23. [d. at 845. 24. [d. at 846. 25. [d. at 851. 26. [d. 27. [d. 28. Lane County v. Oregon, 7 Wall. 71, 76 (1868). 29. 426 U.S. at 852. 30. 426 U.S. 833, 856 (Brennan, Jr., dissenting). 31. [d. 32. [d.; Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1. 33. 426 U.S. at 858. 34. [d. at 867. 876. 35. 426 U.S. 833, 880 (Stevens, J., dissenting). 36. [d. 32 HOUSE - No. 6133 [October CHAPTER V. THE PRELUDE TO GARCIA: THE NATIONAL LEA GUE OF CITIES DOCTRINE REFINED Following the Court's constitutional holding in National League of Cities, several cases were brought before the high tribunal in which the central issue was whether certain challenged federal regulatory actions should be invalidated under the principles set forth in that landmark federalism decision. The holdings in the cases spawned by National League of Cities ostensibly clarified the doctrine stated in that case. Attempting to more clearly delineate which governmental functions were immune from federal regulations under National League of Cities, the actual effect of these subsequent rulings was to limit the scope of the decision's applicability. Hodel v. Virginia Surface Mining and Reclamation Association! The validity of the Surface Mining Control and Reclamation Act of 1977 was challenged in this 1981 Supreme Court case. This act established minimum standards for surface mining operations. Stricter federal standards were imposed upon states that failed to comply with the minimum criteria. A federal district court had earlier ruled the legislation unconstitutional based on the Nq.tional League of Cities holding. The Hodel Court unanimously upheld the statute and in the process restated National League of Cities by formulating a four-part test that had to be met in order for a state activity to be considered immune from the reach of federal regulation: First, there must be a showing that the challenged statute regulates the "States as States"... Second, the federal regulation must address matters that are indisputably "attribute [s] of state sovereignty." .. '. And third, it must be apparent that the States' compliance with the federal law would directly impair their ability "to structure integral operations in areas of traditional governmental functions."2 In addition, the Court supplemented this three-pronged test with a footnote: Demonstrating that these three requirements are met does not, however, guarantee that a Tenth Amendment challenge to congressional commerce power action will succeed. There ( I ] I ( " t c I I ( c 1987] HOUSE - No. 6133 33 are situations in which the nature of the federal interest advanced may be such that it justifies stat~ submission. 3 The three-pronged test was thus, in effect, expanded with the qualifier to include a balancing test. Although widely considered as dicta at the time, Justice Blackmun, in his concurring opinion in National League of Cities, had interpreted the Court as adopting such an approach in its majority opinion. 4 The key to the Hodel decision was the Court's determination that the statute did not regulate states but "only the activities of coal mine operators who are private individuals and businesses." 5 Consequently, the Court ruled that the first prong of the test was not met. The Court's reasoning thereby "repudiated the idea that National League of Cities granted any immunity against congressional regulation of the private sphere, even in areas traditionally left to the states. "6 Federal Energy Regulatory Commission v. Mississippi 7 This 1982 Supreme Court decision upheld the constitutionality of the Public Utility Regulatory Policies Act of 1978, a statute enacted in response to the energy crisis that was afflicting the nation. State utility regulatory commissions were directed to "consider" the adoption of specific federal regulatory standards. 8 The statute also required the Federal Energy Regulatory Commission (FERC), in consultation with state commissions, to promulgate rules designed to promote the development of cogeneration and small power facilities. Implementation and enforcement of these rules were left to the states. The legislation, however, was struck down by a federal district court applying the National League of Cities guidelines. 9 The high court reversed the district ruling and held that the act did not represent an unconstitutional encroachment on the sovereignty of the states. The Court ruled that the statute was not a threat to the "separate and independent existence" IO of the states, nor did it impair their ability "to function effectively in a federal system." 11 The Court characterized the conscription of state regulatory agencies as a permissible act of cooperative federalism since, under its commerce power, the federal government could have preempted the entire field of energy policy. Instead, the national government merely preempted conflicting state energy regulations. 12 34 HOUSE - No. 6133 [October The majority opinion drew sharp dissent from three of the five Justices who comprised the National League of Cities majority. Although Justice Blackmun had abandoned the National League of Cities coalition, the remaining justices were joined by Justice O'Connor who, only the year before, had been appointed to replace the retiring Justice Stewart. O'Connor contended, in writing the minority opinion, that there was nothing "cooperative" about drafting state agencies into "the national bureaucratic army." 13 Applying the standards developed in Hodel, O~Connor found the statute to be a clear violation of the states' prerogatives that was manifestly unconstitutional under the principles enunciated in National League of Cities. Justice Powell viewed the act as a violation of the Tenth Amendment that interfered with "an important state function." 14 United Transportation Union v. Long Island RailroadI5 The National League of Cities test was next applied in this 1982 case concerning a state-owned and operated passenger railroad in New York and a conflict between federal and state labor laws. I6 After previously being under private ownership for 132 years, the commuter line was acquired by the state in 1966. The railroad continued to conduct its labor negotiations pursuant to the federal Railway Labor Act until a bargaining impasse developed in 1978. With the failure of mediation efforts, the union sought a declaratory judgment from a federal district court that the Railway Labor Act was applicable to its dispute with the railroad. If the court agreed with its position the union would be free to call a strike since this tactic was permissible under the federal statute. The railroad, meanwhile, attempted to block such an action by filing suit in a state court to enjoin the union under New York law. The federal court ruled in favor of the union while the state suit was pending. That decision, however, was reversed by a federal appeals court which held that operating a railroad was an essential state governmental function. The appeals court stated further that the federal statute displaced the ability of the states to make "essential government decisions" and noted that the federal interest in uniform railway laws failed to outweigh that of the state. I ? The appellate court ruling, however, was reversed by a unanimous Supreme Court decision. Relying on the third prong ofthe Hodelformulation of the National League of Cities test, the Court, in an opinion written by Chief Justice t ~ ( ( I ( I I 1 I I ( t I 1 ( ( I f t t c 1987] ( HOUSE - No. 6133 35 Burger, held that the act in question failed to "directly impair [the States'] ability to structure integral operations in areas of traditional governmental functions. "18 The Court, noting that only two of seventeen commuter railroads in the country at the time were state owned and operated, concluded that the operation of railroads "has traditionally been a function of private industry, not state or local governments. 19 The Court stated that the fact that some railroads had come under state control "does not alter the historical reality that the operation of railroads is not among the functions traditionally performed by state and local governments. Federal regulation of stateowned railroads simply dOe:s not impair a state's ability to function as a state. ''20 The Court's conclusions were derived from an analysis that represented a further elaboration of the National League of Cities test. In effect, the Court adopted three additional factors to be considered in identifying a "traditional governmental function": (1) historical reality, i.e., whether there exists a record of state activity in the area; (2) other factors indicating that a particular function is a current and basic state prerogative; and (3) the history and scope of federal regulation in the area. 21 The Court pointed to the federal government's historic role in regulating railroads and cautioned that attempts to circumvent federal railroad labor statutes threatened to disrupt the efficiency of operations achieved through the uniformity of Congress' mandates. 22 Equal Employment Opportunity Commission v. Wyoming23 This 1983 Supreme Court decision concerned the applicability of the federal Age Discrimination Act of 1967 to employees of state and local governments. Described by one legal scholar as being "virtually indistinguishable from National League of Cities, "24 the case originated in a federal district court when the Equal Employment Opportunity Commission (EEOC) challenged a Wyoming statute permitting the state to retire game wardens at age fifty-five. The federal law prohibiting discrimination against certain employees between the ages of forty and seventy was extended by Congress to the states in 1974. The district court agreed with Wyoming's contention that the extension of the law violated the principles set 36 HOUSE - No. 6133 [October forth in National League of Cities and dismissed the suit. The Supreme Court, however, reversed the lower court's decision upon appeal. Again relying on the third prong of the Hodel test, the Court ruled that the federal law was constitutional since it failed to directly impair the ability of the states to "structure integral operations in areas of traditional governmental functions. "25 The Court, in an opinion written by Justice Brennan, further pointed out that "the degree of federal intrusion in this case is sufficiently less serious than it was in National League of Cities so as to make it unnecessary for us to overide Congress' express choice to extend its regulatory authority to the States. ''26 The federal statute, the Court noted, provided the states sufficient leeway since it made exceptions for those instances "where age is a bona fide occupational qualification. ''27 While also joining Brennan's majority opinion, Justice Stevens wrote a separate concurring opinion in which he advocated the reversal of National League of Cities.2 8 Stevens described the latter decision as being "inconsistent with the central purpose of the Constitution itself' and one which warranted prompt rejection. 29 The same coalition which had so vehemently dissented in FERC v. Mississippi was equally ardent in condemning the m~jority opinion in this decision. Joined by Justices Powell, Rehnquist and O'Connor, Chief Justice Burger argued that Wyoming's statute represented an employment decision that constituted a fundamental state function and that the application of the federal act to the states violated all the prongs of the test the Court had developed in Hodel. The Chief Justice further noted that the enforcement clause of the Fourteenth Amendmenpo also empowers Congress to enact legislation affecting the states but he pointedly wrote that "this does not mean that Congress has been given a 'blank check" to intrude into details of states' governments at will. The Tenth Amendment was not, after all repealed when the Fourteenth Amendment was ratified: it was merely limited. "31 Burger's references to the Fourteenth Amendment were significant since they suggested an inclination to extend the scope of National League of Cities limitations on federal action to this constitutional source of congressional power over the states. 32 Justice Powell and O'Connor also wrote separate dissenting opinions in which they attacked Justice Stevens' interpretations of federalism as articulated in his concurrence. Powell chastised Stevens I) J 1987] HOUSE - No. 6133 37 for failing to recognize any limits on Congress' ability "to override state sovereignty in exercising its powers under the Commerce Clause .... Under this view it is not easy to think of any state function - however sovereign - that could not be preempted. "33 Refinement or Retreat? Theoretically, the Court's rulings in the cases spawned by National League of Cities represented an ongoing refinement of the doctrine on which that decision was based. In fact, however, closer examination of those series of holdings reveals that the Court seemed to be retreating from that decision. The 5-4 vote in the original decision demonstrated thai the ruling had lacked the solid support of the Court. Although Justice Blackmun joined with the majority, he also wrote a separate concurring opinion in which he indicated that he was troubled by "certain possible implications of the Court's opinion. "34 When Blackmun, in the subsequent cases, withdrew from the coalition which comprised the National League of Cities majority, the Court drifted off the course set by that opinion. Before long its direction would be reversed - along with National League of Cities itself. ENDNOTES I. 452 U.S. 264 (1981). 2. /d. at 287, 88 (citations omitted). 3. [d. at 288 n. 29. 4. 426 U.S. 833, 856 (Blackmun, J., concurring). 5. 452 U.S. at 288. 6. Field, supra, at 93. 7. 456 U.S. 742 (1982). 8. Kobylka, supra, at 28. 9. [d. 10. 456 U.S. at 765, 66. II. [d. at 764 n. 28. 12. Kobylka, supra, at 28. • 13. 456 U.S. 742, 775 (O'Connor, J., dissenting). O'Connor was joined by Chief Justice Burger and Justice Rehnquist. ! 14. 456 U.S. 742 (Powell, J., concurring in part and dissenting in part). 9 ! 15. 455 U.S. 678 (1982). 38 HOUSE - No. 6133 [October 16. Bernard Schwartz, "National League of Cities Again - R.I.P. On A Ghost That Still Walks?" 54 Fordham Law Review 141, 146 (1985); Rosemarie E. Del Monte, Garcia v. San Antonio Metropolitan Transit Authority: And The States Stand Alone," 19 Creighton Law Review 105, 116 (1985). 17. 455 U.S. at 682. 18. [d. at 684. 19. /d. at 686. 20. [d. 21. DelMonte, supra, at 117. 22. Joseph M. Lynch, "Garcia v. San Antonio Metropolitan Transit Authority: An Alternate Opinion," 16 Seton Hall Review 73, 83 (1986). 23. 103 S. Ct. 1054 (1983). 24. Field supra, at 87. 25. 103 S. Ct. at 1060. 26. [d. at 1062. 27. [d. at 1057. 28. 103 S. Ct. 1054, 1067 (Stevens, J., concurring). 29. [d. 30. U.S. Const., Art. XIV, sec. 5. 31. 103 S. Ct. 1054, 1072 (Burger, c.J., dissenting). 32. See Kobylka, supra at 30. 33. 105 S. Ct. 1054, 1080 (Powell, J., dissenting). 34. 426 U.S. 833, 856 (Blackmun, J., concurring). \ 1987] ~r HOUSE - No. 6133 39 CHAPTER VI. GARCIA V. SAN ANTONIO METROPOLITAN TRANSIT AUTHORITY: THE TENTH AMENDMENT LAID TO REST II '. National League of Cities had appeared to be a landmark case that had recognized constitutional limitations on the federal government's power to regulate commerce. Although the decision had originally seemed to be a watershed judicial acknowledgement of a sphere of sovereign state authority, the Court's subsequent decisions in related cases discouraged such perceptions. In each of the fbur post-National League of Cities cases described in the preceding chapter, the Supreme Court was faced with deciding the applicability of the doctrine it had enumerated in its 1976 decision. The basis of that doctrine was the principle that states were immune from federal commerce regulations that directly displaced their "freedom to structure integral operations in areas of traditional governmental functions. "I In the cases which ensued, however, the Court determined that such immunity did not apply to the factual situations with which it was presented. In each instance, the Court found, for one reason or another, that the state sovereignty principles it articulated in National League of Cities were not applicable. Whatever promise National League of Cities had held for those who applauded it was soon extinguished by the ruling in Garcia v. San Antonio Metropolitan Transit Authority.2 e Factual Background \ The San Antonio Metropolitan Transit Authority (SAMT A) is a publicly-owned regional transit authority that began operations in 1978. The system had been privately owned and operated until 1959 when it was acquired by the City of San Antonio. Ownership of the transit system was transferred in 1978 from the city to a public mass transit authority. The case originated in 1976 when the San Antonio Transit System (SA TS) informed its employees shortly after the National League of Cities decision that they were no longer covered by the overtime provisions of the FLSA amendments of 1974. The federal government challenged that assertion in a 1979 advisory opinion issued by the Wage and Hour Administration of the Department of Labor (DOL). 40 HOUSE - No. 6133 [October - The opinion stated that SAMT A's operations "are not constitutionally immune from the application of the Fair Labor Standards Act" under National League of Cities. SAMTA filed suit in federal district court seeking a determination to the contrary. The Secretary of Labor, in turn, countersued for enforcement of the overtime and recordkeeping requirements of the FLSA. A concurrent civil action was also brought against the transit authority by Joe Garcia, a SAMT A driver, and several fellow employees. The district court stayed the civil suit but allowed Garcia to intervene as a defendant in support of the Secretary. District Court Disposition The district court ruled in favor of SAMT A in 1982 and granted it declaratory relief. The court found that local mass transit systems such as SAMT A "constitute integral operations in areas of traditional governmental functions" and hence are immune from federal regulation under National League of Cities. 3 The ruling was appealed to the Supreme Court, which in light of its recent Long Island Railroad decision, vacated the district court's judgement and remanded it for further consideration. On remand, tpe lower court reaffirmed its original decision: Upon further consideration, this Court finds nothing in LIRR that compels a change in its previous conclusion that a public transit system is a governmental function entitled to Tenth Amendment immunity.4 After judgement was re-entered for SAMT A the Secretary of Labor and Garcia again appealed to the Supreme Court. The Court accepted the case and following a round of briefing and oral argument it was ordered held over for reargument during the next term.5 In addition to the question of whether the FLSA should apply to SAMT A, the parties were requested to address "whether or not the principles of the Tenth Amendment as set forth in National League of Cities v. Usery should be reconsidered?"6 The State and Local Legal Center, representing state, county and municipal government officials filed amicus curiae briefs in support of SAMTA.7 Similar briefs were also filed by the American Public Transit Association. 1987] ~r HOUSE - No. 6133 41 National League of Cities Overturned " J On February 19, 1985, the Supreme Court·stunned all parties in the case when it "delivered a broadside decision"8 that not only went against SAMT A but which reversed National League of Cities. Even the Solicitor General, who had argued the case for the federal government, had urged the Court to uphold its 1976 precedent. Seeking only a clarification of the test established by National League of Cities, the federal government's attorney was instead "surprised and grieving" over the outcome. 9 Although it could have simply applied its unanimous Long Island Railroad decision and held that the operation of SAMT A did not represent a "traditional governmental function," the Court ruled in a 5-4 decision that attempting to apply this standard was "unworkable [and] inconsistent with established principles of federalism." 10 .1 i Mass Transit and Federal Funding t ) t e i s i i t r j s n e tf '. I t ... '" Looking first to the issue of whether the FLSA should apply to SAMTA's operations, the Court began its analysis, in an opinion authored, significantly, by Justice Blackmun, by noting that public transportation in San Antonio, as with the United States generally, originally was provided by private enterprises. The Court further pointed out that with the advent of publicly-operated transit systems, municipalities such as San Antonio began to rely on the federal government for substantial subsidies - principally through funds made available under the Urban Mass Transportation Act of 1964 (UMTA).II To illustrate the extent of such funding, the Court cited the fact that, under UMTA, states and localities had received over $22 billion in mass transit aid since its enactment - $3.7 billion in 1983 alone. 12 Although Justice Blackmun was careful in noting that his references to UMT A were not meant to imply that federal regulation under the Commerce Clause must be accompanied by countervailing financial support, these references had clear implications nonetheless. In its Hodel decision, the Court identified four prerequisites that must be rriet for governmental immunity under National League of Cities. The second prong of the Hodel test required a challenged statute to "address matters that are indisputably 'attribute[ s] of state sovereignty'." 13 In citing the degree to which public transit systems were dependent upon federal financial 42 HOUSE - No. 6133 [October assistance, Blackmun seemed to be assailing the credibility of any claims of state sovereignty in the field. Blackmun's remarks suggest that he ignored the argument presented in a State and Local Legal Center brief which contended that the acceptance of UMTA grants was irrelevant to the issue of Tenth Amendment immunity. 14 The brief noted that the Court had ruled in a prior case that in order for Congress to impose conditions upon federal grants the conditions must be clearly expressed to grant applicants. 15 State and local governments might otherwise be unaware of the obligations they would assume upon acceptance of grants, according to the Court's own logic. In the case of UMT A, amici asserted, grant funds were not conditioned upon compliance with the wage and hour provisions of the FLSA. Conversely, the Court itself in an earlier case involving UMT A, had declared that "Congress made it absolutely clear that it did not intend to create a body of federal law applicable to labor relations between local government entities and transit workers." 16 Difficulties Defining "traditional governmental functions" The Court focused next on the third prong of the Hodel test that a challenged federal statute must interfere with "traditional governmental functions." The district court had earlier expressed concern with identifying such a function: Despite the abundance of adjectives, identifying which particular state functions are immune remains difficult ... If transit is to be distinguished from the exempt [National League of Cities] functions it will have to be by identifying a traditional state function in the same way pornography is sometimes identified: someone knows it when they see it, but they can't describe it. 17 Justice Blackmun underscored the difficulty in distinguishing between exempt and non-exempt functions under National League of Cities by comparing a number of lower court cases. In five of the cases cited in which the courts ruled in favor of exemptions, the functions involved included: regulating ambulance services; licensing automobile drivers; operating a municipal airport; performing solidwaste disposal; and, operating a highway authority. The functions involved in the other ten cases cited in which the courts ruled against exemption included: issuing industrial development bonds; regulating air transportation; operating a telephone system; leasing and selling r f I 1 , J ,J t , J , J 1987] HOUSE - No. 6133 43 natural gas; operating a mental health facility; and providing in-house domestic services for the aged and handicapped. Blackmun stated that he found "it difficult, if not impossible, to identify an organizing principle that places each of the cases in the first group on one side of a line and each of the cases in the second group on the other side. "18 Although the Court in National League of Cities had given examples of protected and unprotected functions, Justice Blackmun pointed out that it had failed to explain how those examples had been identified. 19 In Long Island Railroad, the Court largely relied on the historical reality that the operation of railroads is not among the functions traditionally performed by state and local governments." 20 At the same time, however, it disavowed "a static historical view of state functions generally immune from federal regulation. ''21 In spite of this, the Long Island Court emphasized the long-standing historical record of federal involvement in the rail transportation field. 22 Justice Blackmun further noted that, in Long Island Railroad, the Court had held that examining a particular function's "traditional" nature was merely a means of determining whether a challenged federal statute interfered with "basic state prerogatives. "23 The Court, however, had neglected to explain what makes one state function a "basic prerogative" and another function not basic. In the Garcia ruling, Blackmun compared the difficulties the Court faced in arriving at a practicable definition with its earlier experience in the related field of state immunity from federal taxation. At various times in the forty years following the Court's ruling, in South Carolina v. United States,24 that state tax immunity extended only to "ordinary" and "strictly governmental" agencies, the Court had identified protected functions as "essential," "usual," or "traditional. "25 These adjectives were all employed in attempts to ~istinguish between "governmental" and "business or proprietary" functions. That these attempts proved to be less than successful is illustrated by the Court's rulings in several cases which Blackmun cited. In 1911, the Court held that providing a municipal water supply "is no part of the essential governmental functions of a state." 26 Twenty-six years later, the Court inexplicably ruled that such a function was essentia1. 27 In 1934, however, the Court held that the Boston Elevated Railway did not constitute an immune function. 28 Four years after the decision, the Court, in a case involving the New York Port Authority, recognized that an implied constitutional 44 HOUSE - No. 6133 [October distinction between a publicly-operated transportation system and a municipal water work system based on an essential/ non-essential test could only manifest uncertainty and instability.29 By 1946, in fact, the Court had found that such distinctions were so "untenable" they warranted abandonment. 30 The Garcia Court determined that such distinctions were equally "unworkable" in the field of regulatory immunity under the Commerce Clause. Apart from such difficulties, however, the Court was troubled by a more fundamental problem. Although objective criteria for identifying "traditional governmental functions" proved to be elusive, the Court was more concerned that, "regardless of how the distinctions are phrased," 31 judicial attempts to demarcate boundaries around sovereign state functions were contrary to the principles of federalism: Any rule of state immunity that looks to the "traditional," "integral," or "necessary" nature of governmental functions inevitably invites an- unelected federal judiciary to make decisions about which state policies it favors and which ones it dislikes. 32 Hence, the Court rejected, "as unsound in principle a~d unworkable in practice," any rule of state immunity from federal regulation that is derived from "a judicial appraisal of whether a particular governmental function is 'integral' or 'traditional'." 33 The Court held that any limits on the power of the federal government to interfere with state functions must be found elsewhere. Constitutional Checks on Federal Power t 1 s 1 1 1 Justice Blackmun observed in Garcia that states enjoy "a significant measure of sovereign authority." 34 Qualifying that observation, he wrote that "they do so, however, only to the extent that the Constitution has not divested them of their original powers and transferred those powers to the Federal Government." 35 Elaborating on this theme, Blackmun quoted from an address James Madison gave to the First Congress: Interference with the power of the States was no constitutional criterion of the power of Congress. If the power was . not given, Congress could not exercise it; if given, they might exercise it, although it should interfere with the laws, or even the Constitution of the States. 36 t ~ r s f, C a v F r 1987] a Excluding the rare guarantees such as the inviolability of state territorial boundaries,37 the Constitution, Blackmun noted, does not fashion explicit areas of state sovereignty that may not be displaced by Congress in exercising its delegated powers. Thus, Blackmun reasoned that, "In short we have no license to employ freestanding conceptions of state sovereignty when measuring congressional authority under the Commerce Clause." 38 Instead, according to the Garcia Court, the framers devised a constitutional scheme in which the states' role is primarily ensured by "the structure of the Federal Government itself." 39 The Coart cited the fact that states were vested with indirect , influence over the House of Representatives through their control of electoral qualifications. States also have indirect influence over the executive branch, the Court said, by virtue of their role in the electoral college. In addition, it was pointed out that states were given direct influence in the Senate through equal representation in that branch of Congress. The Court further noted that, originally, each senator was to be selected by the legislature of his or her state. Justice Blackmun acknowledged that the adoption of popular elections for senators, along with other structural changes in the federal government, may have altered the influence of the states in the national political process. Nonetheless, Blackmun was adamant that the sovereign interests of the states "are more properly protected by procedural safeguards inherent in the structure of the federal system than by judicially created limitations on federal power." 40 Disregarding changes that have occurred since 1789, the Court based its ruling on its interpretation that the intent of the Framers was to bridle federal power over the states through "the built-in restraints that our system provides through state participation in federal governmental action. "41 To illustrate the apparent effectiveness of the federal political process in protecting the interests of the states, the Court noted that state and local governments have been so successful in obtaining federal support that one-fifth of their expenditures are now funded by federal grants. 42 The Court further observed that the states have also succeeded in gaining congressional exemptions from a wide variety of laws enacted under the Commerce Clause - including the FLSA. t e y t I t HOUSE - No. 6133 4S 46 HOUSE - No. 6133 [October In summation, the Garcia Court declared its unabashed faith that the political position of the states in the federal system would serve to protect their interests: The political process ensures that laws that unduly burden the States will not be promulgated ... [The National League of Cities doctrine] underestimated, in our view, the solicitude of the national political process for the continued vitality of the States. 43 The Garcia majority was assuredly confident that the political process would protect the states from federal encroachment. The confidence the Court evinced., along with its disregard of the Tenth Amendment, incited howls of incredulity among the ruling's detractors. One legal scholar was led to remark that it was difficult to accept the Court's argument as anything "other than a good-hearted joke. "44 Although the dissenting justices in Garcia may not have shared that commentator's "skepticism that those who assert this argument can possibly believe it",45 it would be an understatement to say that they found the Court's reasoning to be naive and deficient. A Court Divided As with National League of Cities itself, the Garcia decision which reversed it was based on a narrow 5-4 majority. Justice Powell wrote a minority opinion which was joined by Chief Justice Burger and Justices Rehnquist and O'Connor. O'Connor also wrote a dissent in which Justices Powell and Rehnquist joined. A separate, one paragraph dissent was written, as well, by Rehnquist, who limited his opinion to some technical points regarding the minority opinions. 46 Although recognizing that the doctrine of stare decisis (upholding precedents) is not rigidly applied by constitutional questions, Justice Powell was troubled that the Court would so abruptly ignore the rationale of National League of Cities and its progeny without the special justification such a departure from the doctrine usually demands. 47 Powell noted that, in its unanimous Hodel decision, the Court had considered the National League of Cities test to be "settled constitutional doctrine 48 despite the fact that it "may at times be a difficult one. "49 That difficulty was acknowledged by Justice O'Connor, who wrote that, indeed, "It has been difficult for this Court to craft bright lines ---------- 1987] at ve al Ie th ;'s ~lt :d Ie is 1t t. :h te .d .n le 1S l- is :tl o ts le 1S if It :e :s HOUSE - No. 6133 47 defining the scope of the state autonomy protected by National League of Cities. "50 In O'Connor's view, however, complications are to be expected when attempting to resolve constitutional concerns such as a conflict between "federalism and the effectiveness of the commerce power." 51 Rather than reconcile these dual concerns, according to O'Connor, the Court instead chose to retreat from its constitutional duty. While also acknowledging the difficulty of defining the realm of "traditional governmental functions" with precision, Powell further observed that "the luxury of precise definitions is one rarely enjoyed in interpreting and applying the general provisions of our Constitution." 52 In addition, Powell expressed confoundment that Justice Blackmun could conclude in National League of Cities that "the result with respect to the statute under challenge here [the FLSA] is necessarily correct"53 yet reach the opposite conclusion in Garcia without even discussing the statute or identifying any changed circumstances that would "warrant the conclusion today that National League of Cities is necessarily wrong. " 54 The Garcia dissenters were even more astounded by the majority's view that the states' role in the electoral process would protect them from federal infringement on their "residual state sovereignty." 55 Powell stated that the Garcia ruling leaves the role of the states in the federal system dependent "upon the grace of elected federal officials, rather than on the Constitution as interpreted by the Court." 56 The majority's opinion was characterized by Powell as one which "radically departs from long settled constitutional values and ignores the role of judicial review in our system of government." 57 Noting that the Tenth Amendment is a primary feature of the Bill of Rights, Powell assailed the Court's logic that the political process would protect the states from federal encroachment: - One can hardly imagine this Court saying that because Congress is composed of individuals, individual rights guaranteed by the Bill of Rights are amply protected by the political process. Yet, the position adopted today is indistinguishable in principle. 58 Powell further pointed out that although members of Congress are elected from their states, once they are in office they become members of the federal government. Pursuing his assault on the Court's logic, Powell also took notice of "a variety of structural and political changes 48 HOUSE - No. 6133 [October in this century [that] have combined to make Congress particularly insensitive to state and local values. "59 Powell cited the direct election of senators, the weakening of political parties on the local level, the burgeoning of sophisticated special interest groups, and the emergence of national media as examples of the changes that "have made Congress increasingly less representative of State and local interests, and more likely to be responsive to the demands of various national constituencies. "60 Agreeing with Powell's estimation, Justice O'Connor also caustically concurred with his view on the federal government's tendency "to exceed the outer limits of its power" :61 With the abandonment of National League a/Cities, all that stands between the remaining essentials of state sovereignty and Congress is the latter's underdeveloped capacity for selfrestraint. 62 Powell also criticized the Garcia majority's assessment that the "effectiveness of the federal political process in preserving the States' interests" 63 is demonstrated by their success in obtaining federal funds and in securing exemptions from various federal statutes. Such political success was considered irrelevant to Powell in determining whether the political process is the "proper means of enforcing constitutional limitations" :64 The fact that Congress generally does not transgress constitutional limits on its power to reach State activity does not make judicial review any less necessary to rectify the cases in which it does do so. The States' role in our system of government is a matter of constitutional law, not of legislative grace. 65 According to Powell, the Garcia ruling left federal political officials as the "sole judges of the limits of their own power." 66 Powell and O'Connor both scolded their colleagues in the majority for virtually ignoring the Tenth Amendment. Blackmun's opinion, as Powell remarked, barely acknowledged the amendment's existence. The Court, in fact, mentioned the Tenth Amendment only once and that was merely when it restated the question that the parties in the case were requested to brief and argue. Powell warned that the federal system adopted by the Framers of the Constitution would be imperiled by judicial failure to enforce the Tenth Amendment. The Garcia majority was reminded by Powell that the intention of the Framers, as expressed in the Federalist Papers, 1 , e ( ( to o 11 S s' n l' " a t( C n g Ii e: o c( Sl al n n a~ n~ 1987] uly Ion the nce ade sts, nal :Ice ~ral the :es' lds lch mg ng :tIs nd lly ell he .at .se of he at 's, HOUSE - No. 6133 49 was to limit the jurisdiction of the federal government "to certain enumerated objects only, ... leav[ing] to the several States a residuary and inviolable sovereignty over all other subjects." 67 Madison's description of the separate spheres of federal and state authority was quoted by Powell: The powers delegated by the proposed constitution to the Federal Government are few and defined. Those which are to remain in the State Governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace negotiation, and foreign commerce; ... The powers reserved to th~ several States will extend to all the objects, which, in the ordinary course of affairs, concern the lives, liberties and properties of the people; and the internal order, improvement, and the prosperity of the State. 68 Sidestepping the semantic struggling over "traditional governmental functions," which had so stymied the majority, Powell found the operation of a municipal mass transit system to be "indistinguishable in principle from the traditional services of providing and maintaining streets, public lighting, traffic control,' water, and sewerage systems." 69 Disregarding its relative novelty, Powell characterized the municipal operation of a transit system as "a classic example of the type of service traditionally provided by local government." 70 Powell and O'Connor expressed fear that by impairing the states' abilities to perform their traditional functions, federal overreaching under the Commerce Clause would result in undermining "the constitutionally mandated balance of power between the States and the federal government, a balance designed to protect our fundamental liberties." 71 Comparing the Framers' narrow perception of commerce with the expansive meaning the Court has given it over the years, O'Connor observed that, "Because virtually every state activity, like virtually every activity of a private individual, arguably 'affects' interstate commerce, Congress can now supplant the States from the significant sphere of activities envisioned for them by the Framers."72 O'Connor argued that in determining the validity of congressional commerce regulation of a state it is inadequate to merely ask whether the same regulation would be valid if enforced against a private party. "As far as the Constitution is concerned," O'Connor wrote, "a State should not be equated with any private litigant. "73 In order to properly make 50 HOUSE - No. 6133 [October such an assessment, according to the dissenting justices, the Court should employ a balancing test in which the federal interest is weighed against the potential harm to the autonomy of the states. Referring to the spirit if not letter of the Tenth Amendment, O'Connor quoted a distinguished constitutional scholar: The question, always, is whether the exercise of power is consistent with the entire Constitution, a question that can be answered only by taking into account, so far as they are relevant, all of the values to which the Constitution - as interpreted over time - gives expression. 74 The Garcia court had failed in this respect, according to Powell, who described its ruling as one which "rejects almost 200 years of the understanding of the constitutional status of federalism." 75 Powell succinctly summarized the sentiments of the dissenting justices: Indeed, the Court's view of federalism appears to relegate the States to precisely the trivial role that opponents of the Constitution feared they would occupy.76 , Dire Consequences Forecasted The immediate impact of the Garcia decision was to subject state and local governments to the provisions of the Fair Labor Standards Act. Dire consequences of reduced services and/ or increased taxes were predicted by representatives of those governments. To avoid the anticipated burdens associated with FLSA compliance, states and municipalities were compelled to beseech Congress to amend the law by exempting them from its coverage. A successful lobbying effort, however, would only address the urgent issue of impending financial chaos. The fact that the Court had "washe[d] its hands of all efforts to protect the States"77 loomed as an issue that transcended the economic impact of the Garcia ruling. With the' rejection of the National League of Cities doctrine, Congress was given virtually unlimited freedom to exercise its commerce power as it saw fit regardless of whether it impaired the ability of the states to perform their functions. As it stood, the states could only share the optimism of Justice Rehnquist that the principles embodied by National League of Cities would "in time again command the support of a majority of this Court. "78 2 2 2 3 3 3 )ber 1987] HOUSE - No. 6133 51 ENDNOTES ourt ~hed I. 426 U.S. at 852. flng ::lted 2. 105 S. Ct. 1005 (1985). 3. San Antonio Metropolitan Transit Authority v. Donovan, 557 F. Supp. 445, 446 (W.D. Tex 1983) rev'd sub nom. 4.Id. 5. 104 S. Ct. 3582 (1984). 6. Id. veIl, 'the well 7. The State and Local Legal Center is an arm of The Academy for State and Local Government. The Academy is governed by the National League of Cities, the National Governors' Assoc., the National Association of Counties, the National Conference of State Legislatures, the Council of State Governments and the International City Management Association. 8. Van Alstyne, supra at 1709. 9. Linda Greenhouse, New York Times, Feb. 20, 1985. Quoting Rex E. Lee. 10. 105 S.Ct. at 1008. II. Pub.L. 88-365, 78 Stat. 302, as amended, 49 U.S.c. app. ss.I60I et seq. 12. 105 S. Ct. at 1020. 13. 452 U.S. at 287, 88. 14. Brieffor the National League of Cities, et al., at 28. 15. Pennhurst Slate School and Hospital v. Halderman, 451 U.S. I, 17 (1981). tate trds lxes the and law ort, cial )rts the the ally •rm Lsm ~ue rity 16. Jackson Transit Authority v. Local Division 1285, Amalgamated Transit Union, 102 S. Ct. 2202, 2209 (1982) emphasis added. 17. San Antonio Metropolitan Transit Authority v. Donovan, 557 F. Supp. 447, 453 (W.D. Texas) rev'd sub nom. 18. 105 S. Ct. at 1012. 19. 426 U.S. at 851, 854. 20. 455 U.S. at 686, first emphasis added; second in original. 21. Id. 22. Id. at 687-689. 23. Id. at 686. 24. 199 U.S. 437 (1905). 25. -105 S. Ct. at 1013. 26. Flint v. Stone Tracy Co., 220 U.S. 107, 172. 27. Brush v. Commissioner, 300 U.S. 352, 370-373. 28. Helvering v. Powers, 293 U.S. 214 (1934) . 29. Helvering v. Gerhardt, 304 U.S. 405, 427 (1938). 30. New York v. United States, 326 U.S. 572 (1946). 31. 105 S. Ct. at 1015. 32. /d. 52 HOUSE - No. 6133 [October 1 33. /d. at 10 16. 6l 34. 105 S. Ct. at 1017; quoting EEOC v. Wyoming, 460 U.S. at 269 (Powell, J., dissenting). 6~ 35. 105 S. Ct. at 1017. 7( 36. 2 Annals of Congress 1897 (1791) 7: 37. U.S. Const., Art. IV, sec. 3. 38. 105 S. Ct. at 1017. 39. /d. at 1018. 7< 40. Id. at 1018. 4 I. Id. at 1020. 42. Id. at 1019, citing Advisory Commission on Intergovernmental Relations (ACIR), (1984), Significant Features of Fiscal Federalism, at 120, 122. 43. 105 S. Ct. at 1020, 2 I. 44. Van Alstyne, supra, at 1724, F.N. 64. 45. Id. 46. In his majority opinion, Justice Blackmun was joined by Justices Brennan, White, Marshall, and Stevens. 47. In differentiating Garcia from National League of Cities, Powell noted that the rationale of Wirtz, which the latter decision overturned, was not repeatedly accepted in a series of subsequent rUlings. 48. 105 S. Ct. 1005, 1022 (Powell, J., dissenting). 49. /d., quoting Hodel, 455 U.S. at 684. 50. 105 S. Ct. 1005, 1038 (O'Connor, J., dissenting). 5 I. Id. 52. Id. at 1023, F.N. 4 (Powell, J., dissenting). 53. 426 U.S. at 856, emphasis added. 54. 105 S. Ct. at 1025 (Powell, J., dissenting). 55. Id. 56. ld. at 1023. 57. Id. 58. Id. at 1025, F.N. 8. 59. Id., quoting Advisory Commission on Intergovernmental Relations (ACIR), Feb. 1984, Regulating Federalism: Policy, Process, Impact and Reform at 50. . 60. Id. 61. Id. at 1025, quoting Immigration and Naturalization v. Chadha, 462 U.S. 919 (1983). 62. Id. at 1037 (O'Connor, J., dissenting). 63. /d. at 1018. 64. Id. at 1026 (Powell, J., dissenting). 65. Id. 66. Id. 67. Id. at 1028, quoting Madison, The Federalist Papers, No. 39 at 256 (J. Cooke ed. 1961). 7~ 7( 7~ 7~ ober 1987] .ng). 68. Id., The Federalist Papers, No. 45 at 313 (1. Cooke ed. 1961). 69. /d. at 1032 . HOUSE - No. 6133 53 70. Id., emphasis added. 71. Id. 1029 (Powell, J., dissenting). 72. Id. at 1035 (O'Connor, J., dissenting). 73. Id. at 1037. 74. Id. at 1036, quoting Terrance Sandalow, "Constitutional Interpretation," 79 Michigan Law Review 1033, 1055 (1981). 75. Id. at 1023 (Powell, J., dissenting). 1984), 76. Id. at 1030. 77. /d. at 1037 (O'Connor, J., dissenti,ng). 78. Id. at 1033 (Rehnquist, J., dissenting). rshall, ionale ries of 1984, I. 61). 54 HOUSE - No. 6133 [October CHAPTER VII. IN THE WAKE OF GARCIA The Garcia majority redefined the role of the states in the federal system. In effect, the Garcia Court invited the federal government to escalate its unwelcome intrusion into state and local affairs. Moreover, with its ruling, the nation's highest court has apparently abdicated its role as arbiter between the states and the federal government. In addition to its broader implications, however, the Garcia decision subjected the states to a more immediate risk - financial peril. The Immediate Impact: State and Local Budgets on the Brink The most pressing aspect of the Garcia holding was that overtime and minimum wage standards of the FLSA were made applicable not only to Joe G. Garcia and his fellow SAMTA drivers but to practically all state and local government employees. l State and local governments were forced to virtually abandon the widespread practice of granting compensatory time off to employees who worked overtime. Comp-time practices had been particularly relied upon by states and localities in responding to the cyclical or seasonal nature of certain public jobs such as legislative employees, law enforcement officers, fire fighters, forest workers and snow plow drivers, to name but a few. FLSA guidelines, however, require that any overtime hours would have to be reimbursed at the premium rate of one and onehalf times the regular rate of pay unless an employee used the "comptime" within the same pay period in which it was granted. Such constraints served to severely restrict the use of comp-time as a practical cost-reducing option. Estimates projecting the annual cost, of compliance with the overtime provisions of the FLSA ranged from the International City Managers Association's conservative figure of $321 million to the whopping $3 billion "worst case" calculation of the National Public Employer Labor Relations Association. 2 The Department of Labor (DOL) calculated that if the FLSA had applied to state and local governments during calendar year 1984 the nationwide overtime costs would have amounted to $733 million. 3 The DOL also estimated that it would cost states and localities $396 million over the same period to comply with the minimum wage requirements of the FLSA.4 - Der ral to redint. on me lot :lC- cal lce :ed by lfe ~nt ne IrS letpm- :;al erm- he lic lor ;al sts tat od \.4 1987] HOUSE - No. 6133 -------------------- 55 Approximately 240,000 state and local government employees were identified by the DOL as being paid sub-minimum wages. This latter category of employees was generally comprised of salaried workers whose hourly rate was brought below the minimum level by the excessive number of hours they logged during a pay period. In addition to projected FLSA compliance costs, state and local governments were faced with potential lawsuits aimed at holding them liable for retroactive wage adjustments. FLSA provisions also threatened to terminate or restrict the use of volunteer workers. Under federal guidelines, volunteers who are paid a nominal fee or reiqlbursed for expenses may be deemed to be employees who would thus be entitled to the minimum wage. Such a requirement would have an impact on volunteer fire departments, volunteer teaching assistants, foster grandparent programs, and other similarly staffed activities. Congress to the Rescue: The FLSA Amended Unless alleviated by Congress, the financial burden of the Garcia decision on state and local governments would have to be met through raising taxes, reducing or eliminating services, foregoing contemplated initiatives, or combinations thereof. Following the staggering February 19, 1985 decision, state and local government officials, along with many of their national and state organizations, mobilized a concerted lobbying effort to convince Congress and the President of the need for remedial legislation. Supported by the Reagan Administration and bolstered by the efforts of U. S. Senator Don Nickles from Oklahoma, state and local government representatives worked tirelessly to inform Congress ofthe scope of the problem. Senator Nickles, chairman of the Subcommittee on Labor of the Senate Committee 00 Labor and Human Services, held strong federalism views and convened hearings to consider how Congress should respond to the Garcia ruling. s Sympathetic to the plight of state and local governments, Rickles introduced S. 1570, a bill which would have provided them with a complete exemption from the overtime provisions of the FLSA.6 The bill would also have clarified the term "volunteers" and would have established the date of the decision as the effective date. The latter stipulation would have eliminated the liability of state and local governments for retroactive overtime compensation. 56 HOUSE - No. 6133 [October Despite the lobbying by state and local government officials and the Secretary of Labor's endorsement for the bill, Senator Nickles and other congressional backers were unable to enlist sufficient political support for the original version of S. 1570. Majorities of both the Senate Labor and Human Resources Committees and the House Education and Labor Committee opposed a complete overtime exemption. Such a provision was fervidly resisted by the AFL-CIO and other unions representing public employees. 7 Union representatives, however, were subject to increasing pressure from members of Congress as well as from their own members, many of whom preferred receiving compensatory time off instead of time and a half pay for overtime work. 8 Compromises were eventually worked out between union and government officials who jointly lobbied the respective House and Senate committees to support the negotiated agreement. Similar but not identical bills were soon passed in both Houses of Congress. Disputes were resolved in conference and legislation amending the FLSA was signed by President Reagan on November 13, 1985. The exemptions contained in the amendments, however, apply only to those state and local government employees who, under the National League of Cities doctrine, were considered to be engaged in traditional governmental functions. Thus, employees engaged in non-traditional functions such as the operation of a municipal electric system and to whom the National League of Cities did not apply, remain under the full coverage of the FLSA. Key highlights of the FLSA amendments are: • Unless prohibited by collective bargaining agreements, compensatory time in lieu of overtime pay may be given at the rate of at least one and one-half hours for each hour for which overtime compensation is required under the FLSA; ( i ] I ( t I t • Maximum accrued comp-time set at 480 hours for public safety, emergency response and seasonal personnel. Comp-time for all other employees is capped at 240 hours; 1 • Overtime wages must be paid at the rate of at least one and onehalf times the regular scale when the comp-time cap is reached. All remuneration given to an employee such as shift differential, educational incentives, longevity pay and other special stipends must be included in calculating the regular rate; I ~ S e er ld ld al [l- :\- n. er s, :1- :d )r :n 1987] HOUSE - No. 6133 57 • Accrued comp-time payment upon termination set at the higher of the regular rate paid at termination or the average regular rate for the three prior years; • FLSA restrictions on the use of volunteers relaxed for state and local governments; • FLSA exemption established for all state legislative employees except those covered by civil service laws and those employed in legislative libraries; • Exemptions also provided for elected officials and certain staff members, appointees and advisors; 10 • FLSA overtime liability existing as of April 14, 1986 waived; • Implementation of FLSA requirements delayed until April 15, 1986. ~r ly le :d In cy, l- It l- {, 11 !- 11 l- While the amendments signed into law have eliminated most of the significant problems that the Garcia decision posed for state and local governments the burden has not been lifted entirely. Even with the amendments, the Department of Labor projected that the overtime costs resulting from the Garcia ruling would amount to $216 million for the year beginning April 1986 and ending March 1987. 11 The DOL's pre-amendment, estimated minimum wage impact of$396 million was not affected by Congress' action.12 Minimum wage compliance was changed by the amendments only with respect to the use of volunteers. In addition to costs such as these, it is impossible to overlook the administrative burden that state and local governments must endure to comply with the FLSA. Extensive record keeping cannot be avoided in order to maintain compliance. Most state and local governments, in fact, need to sustain dual record-keeping systems. The overtime threshold under the FLSA for a 7-day work period, for example, is 40 hours. If an employee is paid for a 44-hour week that includes 8 hours of sick time, the FLSA overtime provisions would not apply since only 36 hours were actually worked. A state or municipality might base its pay periods on a 35-hour week and pay overtime for any hours worked above that threshold. If that were the case, explained a staff member of the Massachusetts Municipal Associa- 58 HOUSE - No. 6133 [October tion, the state or municipality "will rec~i~e [FLSA] credit for such payments even if figured on a base pay rate which is lower than the one stipulated by the FLSA. The FLSA base rate is typically higher because it includes such things as longevity payments. Thus, the credit for the overtime paid on hours worked over 35 and under 40 could exceed what the FLSA would otherwise demand for the time worked in excess of 40 hours. In that case [the state or municipality] would not be liable for any additional wages. "13 The paperwork involved in complying with the FLSA, consequently, is quite extensive. In addition, there are numerous technical provisions of the FLSA that state and local governments must heed in order to avoid being unwittingly liable for overtime wages. A state or municipality may be exposed to overtime liability when an employee answers the phone once or twice while eating lunch at his or her desk or if a worker comes in early and/ or leaves late. Strict guidelines also exist relative to dual employment, on-call employees, and employees volunteering work in a capacity similar to the type of service involved in their regular job. As of now, states and municipalities should be intimately familiar with the FLSA requirements and the burdens they impose. State and local governments have also had sufficient time to develop fiscal strategies designed to meet the costs associated with the overtime provisions of the FLSA (and it should be noted that even granting comp-time at time-and-a-half in lieu of overtime pay is not a costfree alternative). If, in fact, state and local governments have become comfortable with FLSA compliance, it is a testimony to their ability to adapt to sudden and unexpected change. This capability to make needed adjustments, however, should not obscure the issue being discussed here - the federal government directing the manner in which state and local governments structure their internal operations. The Broad Implications of Garcia: State Autonomy Threatened Due to the adversarial nature of the litigants in a court case, the decisions of any court can be expected to generate divergent responses. The nature of a judge's duties, according to one Massachusetts jurist, is such that it guarantees "a fifty percent consumer dissatisfaction 1 r s ( c I t a e ( ( S I ( ( t f ( t I ( ( t )er ch he Ler ~it lld ed lld m- :h1St es. en at ict es, of tar nd ;al ne ng stne tty ke IS- ch he es. st, an 1987] HOUSE - No. 6133 59 rate." Thus the decisions of the U.S. Supreme Court will always be simultaneously applauded by some and condemned by others. The Garcia decision was no exception to this maxim. While many theorists condemned the Court's ruling, others praised it. Some Garcia supporters heartily agreed with the Court's interpretations of the constitutional scheme that was envisioned by the Framers. 14 . Others who accepted the decision did not necessarily embrace the doctrine espoused by the Court but did agree that when a factual situation demonstrates that a state (or in this case, SAMT A,) is "actually dependent, and therefore not sovereign, the question of so-called state sovereignty is irrelevant. "15 The reaction of Garcia foes was similarly mixed. The objection of some critics focused primarily on the financial impact that loomed as a result of the Court's holding. To other detractors, the immediate monetary costs were vastly overshadowed by the ruling's implication that the states govern "largely at the sufferance of the national government. "16 As already noted, the financial impact of Garcia sparked responses conceived to blunt it. States must mount another campaign, however, to thwart the threat of further encroachment by the federal government into their affairs. Fortified by the breadth given to Congress' commerce power by the Supreme Court, the national legislature, in extending the FLSA to state and local government employees, seemed to adopt the posture suggested by an eminent legal scholar: [ W]hatever Congress might preempt from state regulation (namely the determination of wages), it might also command of the states themselves (namely, the payment of wages).17 Even in those instances where Congress is not bold enough to attempt to command the states to conform to its wishes, it is still empowered, according to the Court, to achieve its ends through tactics that can reasonably be described as coercive. Under the "condition doctrine," the federal government is able to indirectly regulate the states through the Constitution's Spending Clause. 18 By attaching conditions to its grants, the federal government has been able to indirectly achieve objectives that would otherwise be unattainable as a result of being beyond the scope of its enumerated powers. Through this application of its spending power, Congress has been able to impose conditions on the states that are unrelated to the nature of 60 HOUSE - No. 6133 [October 1 the underlying grants. This congressional exercise has resulted in a virtually limitless number of grants that attach conditions in disregard of local concerns and which may require states to alter their budget priorities, change their laws or even amend their constitutions. 19 Conditions on the receipt of highway construction grants, for example, have required the regulation of billboard advertising, the concealment of roadside junk yards, the surveying of all roads in order to identify and remedy hazards, the imposition of Hatch Act restrictions on employee political activity, the conformance with the recently amended 55 mile-per-hour speed limit, and the adoption of a minimum drinking age of 21 years. 20 The Supreme Court has repeatedly rejected arguments by the states that the imposed conditions interfere with the sovereign powers reserved to them by the Tenth Amendment. Despite the fact that the states are free to decline the grants and hence the conditions, the fact of the matter is that the states have no practical choice in avoiding the requirements. The level of national taxes inhibits the ability of the states to increase their own taxes. With their fiscal independence undercut, the states are more dependent upon federal financial aid. 21 Acceptance of federal grants, no matter how repugnant the accompanying conditions, is more than just politically expedient. Rejection of federal grants would ultimately result in states denying their citizens the benefits of programs supported by their federal tax dollars.22. The State of South Dakota sidestepped the Tenth Amendment issue and recently challenged the minimum drinking age condition by basing its arguments before the Supreme Court on the grounds that the requirement violated both the Twenty-first Amendment22 and the constitutional limitations on Congr~ss' spending power. In South Dakota v. Do/e,24 the Court acknowledged that it had previously recognized limitations on Congress' spending power. As articulated in earlier cases, that power must be exercised in pursuit of "the general welfare. ''25 In addition, if Congress wishes to condition the receipt of grants it "must do so unambiguously. ''26 The Court has also ruled, without much elaboration, that conditions on grants may be invalid if they do not relate "to the federal interest in particular national projects or progams. "27 Lastly, according to the Court, the conditions must not violate any other constitutional prohibitions. 28 The Court has also recognized that there may be instances in which c c ,. :I a tl h tl u tj h " s: c g F tl 1I a; cl ober 1987] ma Isretheir titu:, for , the Irder :tric- conditional grants might be so coercive that "pressure turns into compulsion. ''29 Applying these standards, the Court, in South Dakota, ruled against the state. One problem with the legal strategy employed by the State of South Dakota was that it did not ask the Court to consider how related a condition must be to the purpose of a grant. Entering the case at the Supreme Court level, the State and Local Legal Center urged the Court to establish that a condition must be directly related to the purpose of the expenditures. Counsel for South Dakota, however, told the Court that he was not prepared to argue the "reasonable relationship" question. The Court stated that it was satisfied with the relationship in this particular factual situation but conceded in a footnote that the point may be a valid one: Our cases have not required that we define the outer bounds of the "germaneness" or "relatedness" limitation on the imposition of conditions under the spending power ... [W]e do not address whether conditions less directly related to the particular purpose of the expenditure might be outside the bounds of the spending power. 30 Describing the condition doctrine as a means by which the federal government may "buy the states' constitutional rights," Barry Friedman, Counsel for the State and Local Legal Center, deplored the breadth of the decision - one which he considered to be the "most important case on federalism since the New Deal, more important even than Garcia. "31 The ruling, in his opinion, meant that the federal government was no longer limited to the powers it was delegated under the Constitution. Friedman, whose argument in the Legal Center's amicus brief was adopted by Justice O'Connor in her dissent, characterized the Court's holding as effectively saying that: We have never had any requirement that the condition relate to the grant. Congress is perfectly free, when if offers you - the state and governments - money, to tell you that the condition for accepting it is to do whatever the federal government would like, no matter what it is, so long as it doesn't violate another constitutional prohibition like the First Amendment or the Equal Protection Clause. 32 Thus, the latter case represents yet another contribution to the gradual erosion of state sovereignty rights ostensibly guaranteed by ~ntly of a tates wers tthe : fact ding tyof ence dd. 21 ;om;tion citirs.22. lssue [l by that j the outh >usly lated rleral pt of uled, {alid 'lonal the ms. 28 'hich HOUSE - No. 6133 61 62 HOUSE - No. 6133 [October the Tenth Amendment. With the acquiescence of the U.S. Supreme Court, the federal government, through both its direct mandates and its funding policies, has been able to achieve a fundamental reworking of its relationship with the states. The existence of the states as autonomous political entities has been increasingly imperiled. States can passively hope that "unwarranted federal encroachments on state authority are and will remain 'horrible possibilities that never happen in the real world',")3 Conversely, states can take affirmative steps to secure their proper constitutional role of diffusing power, checking abuses by the federal government and promoting experimentation in the evolution of enlightened public policy.34 Today, there is a growing recognition in both political and academic circles that doctrinal developments in constitutional law threaten to reduce state governments to mere administrative adjuncts of the national government. This recognition has led the Reagan Administration's Domestic Policy Council to establish the Working Group on Federalism. The purpose of the Working Group is to "identify and develop initiatives for restoring a proper balance to American government. "35 It has also emerged as a forum within the Administration for the discussion of important issues relating to the proper relationship between the national government and the governments of the several States. "36 In pursuit of its mission, the Working Group prepared an extensive report, cited herein several times, which analyzes the current state of constitutional federalism in America. Included in the report are a number of suggested reforms which could be instituted in an effort to revitalize federalism in American government. The desire to undertake such efforts, according to the Working Group, is ne~ther a summons to dismantle the federal government and restore all authority to the states nor a call to return to the days of the Framers: Rather it is a call for a return to the Framers' vision of a nation of States - a system of government in which the national government exercises sovereign authority in accord with the letter, and the limits, of its constitutionally enumerated powers, and the States exercise sovereign authority in all other areas. It is a call for innovation and experimentation in government. And at its very roots it is based on the recognition that the people of the United States are the 1987] :me md mg as ltes ate Jen ; to mg lm mg nal ate nal ill'S on md ~an the the the the ral sm ms m "ts, ttle ra HOUSE - No. 6133 63 ultimate source of sovereignty and that they can best exercise their authority in the statehouses, city halls, town halls, and county court houses scattered throughout this land. 37 In response to his own fervent belief that the balance of governmental authority between the federal government and the states should be restored to his vision of the Framers' intentions, President Reagan has drafted an executive order that, when implemented, could have a profound effect on the status of federalism. The forthcoming order (a draft copy is included as an Appendix) directs executive departments and agencies to be guided by a number of fundamental federalism principles when formulating and implementing policies. The directive also requires that executive departments and agencies adhere to certain criteria designed to reduce unwarranted and intrusive federal activities and to encourage state participation in policy development. Also contained in the order are provisions meant to minimize the extent of federal statutory and regulatory preemption of state laws. The President's order further prohibits executive offices from submitting legislative proposals to Congress that are inconsistent with the principles of National League of Cities, which would attach unrelated conditions to grants, or which would unnecessarily preempt state laws. In addition to summarizing the reforms suggested by the Domestic Policy Council's Working Group on Federalism, the following section will also incorporate possible state responses to the Garcia decision which have been raised by the U.S. Advisory Commission on Intergovernmental Relations. The latter group, comprised of elected officials from all levels of government, federal executive appointees and private citizens, is a 26-member bipartisan body created by Congress in 1959 to monitor the operation of the American federal system and to recommend improvements. Responding to Garcia and the Decline of State Sovereignty The President's executive order is a welcome turn on a road that has been leading to an eradication of "the diffusion of power between state and nation on which the Framers based their faith in the efficiency and vitality of our RepUblic. "38 The President's action, however, is but one of the steps that could be taken to offset a trend 64 HOUSE - No. 6133 [October toward an ever-diminishing sphere of state autonomy. If left unchecked, the risk of the Tenth Amendment being reduced to empty rhetoric will surely be realized. Several strategies to salvage the remaining sovereignty of the states or to restore that which they have already lost are highlighted below. ] 1, Cl 1 Litigation t r In Garcia, the majority stated that it was not the role of the Court to judicially create limitations on federal power.39 Such a position places federal officials in the role as the sole judges of their own power. This, of course, flies in the face of the Supreme Court's historical Marbury v. Madison 40 decision which established the doctrine of judicial review. That ruling affirmed that it is the Supreme Court's role to consider the constitutionality of acts of Congress. It is therefore hardly conceivable that the Court can continue this apparent prank it has perpetrated. In South Carolina v. Baker,41 a case that will be argued this term, the Court will be asked if it really meant in Garcia that it isn't going to rule on any state challenges to federallegislation. 42 Although the State and Local Legal Center expects the Court to reply that, no, it didn't really mean that, the prospects of winning this particular case are not bright. The case concerns the constitutionality of an Internal Revenue Code provision that denies tax-exempt status for state and local bonds that are not issued in registered form. Other cases will arise, however, that may have factual situations more favorable than in Garcia. A case involving a more significant intrusion on the states and entailing a less convincing federal interest could persuade the Court to acknowledge a constitutionally recognized sphere of state sovereignty.43 The Court, for example, could draw a line of immunity around an area of core governmental functions, traditional or not, that is restricted to essentially internal activities. Such activities might include the organization of state and local governments, the treatment of their employees and other "housekeeping functions. "44 In conjunction with the State and Local Legal Center, state and local governments can pursue legal strategies that may result in a repudiation of Garcia. The sharp dissents in that 5-4 decision certainly encourage such an effort. Appropriate cases for challenging the conditional grant policies of the federal government could also be pursued. t a a f s (; .... I j. C Il t r " f 11 e n tl n b a sl 11 g tt e' p CI C1 ,er 1987] eft ,ty he .ve Reform Congressional Procedures lrt )n :al of t's ,re lk be ~ia 42 Ily lIS ty us er 're nt :st .ly le, :al lal ld ,er :al ,es at or nt HOUSE - No. 6133 65 Certain procedural revisions could be adopted by Congress through legislation or through changes in the rules of its two Houses. State and local governments, along with their citizens and other parties interested in the revitalization of federalism, could lobby Congress to revise its internal process to reflect a greater appreciation of the role of the states. Dubious exercises of federal power could be deterred by requiring all bills to explicitly state Congress' constitutional authority to enact them. Congress could also require that bills contain a "Federalism Assessment" that would include a review of the need for a national solution and how such legislation would affect the sovereignty of the states and their ability to perform their functions. Such assessments could be patterned after the Regulatory Impact Evaluation presently required in the Senate or the Regulatory Impact Analysis directed by presidential executive order.45 Since Garcia placed Congress in the position of being the sole judge of its power under the Commerce Clause, the states could lobby the national legislature to impose limits on itself. A standard based on the National League of Cities doctrine could be adopted so that federal regulation of the states would be prohibited if it interferes with "functions essential to [the states] separate and independent functions. "47 In addition, Congress could require that legislation intended to regulate the states contain an explicit statement to that effect. Statues lacking such a statement would thus be construed as not applying to the states. Similarly, Congress could be encouraged to explicitly state its intent to "occupy a field" and preempt state law. Adoption of the latter two reforms would minimize the instances of sovereign state authority being displaced by federal intrusion. The asserted authority of federal agencies to preempt state law is often based on inferences from federal statutes or their legislative histories. The approval of federal courts in preemption cases is also often based on such inferences. If Congress were to require itself to explicitly state its intentions such tendencies would be curbed. Preemption policies could be restricted even further if Congress denied federal agencies the authority to preempt by regulation unless explicitly permitted by a statute. Laws could then be drafted to include standards to control an agency's exercise of its preemption authority. Alternatively, Congress could 66 HOUSE - No. 6133 [October specifically deny agencies the authority to preempt by regulation and require that preemption be accomplished only by statute. States could also pressure Congress to reconsider its practice of conditioning grants to requirements that have little or no relationship to the purpose of the expenditure. The Office of Management and Budget has catalogued 68 "crosscutting" regulations that are imposed on all federal grants regardless of their nature. These are in addition to the "crossover" conditions such as the uniform minimum drinking age and maximum national speed limit discussed earlier. Congress' government affairs committees presently have subcommittees on intergovernmental relations. The subcommittees, however, are generally concerned with the management and efficiency of federal grant programs and rarely consider federalism issues. Pressure could be brought on Congress to establish federalism subcommittees to review all bills that might affect the autonomy of the states. These subcommittees could also be given the responsibility of ensuring compliance with any other reforms Congress may adopt in this regard. Influence National Legislation Should the states fail to persuade Congress to adopt the kind of institutional and procedural reforms discussed above, it will be necessary for the states to aggressively pursue their interests on an ad hoc basis. Adhering to the Garcia majority's edict that "restraints on federal power over the States inhere ... principally in the workings of the National Government itself, "48 states will have to persevere in the federal political arena if they are to repel intrusive and burdensome legislation. The states will need to remain keenly aware of legislation being considered by Congress in order to lobby for specific exemptions from laws that encroach on their authority. Seek a Constitutional Amendment Although given the difficulties involved in amending the Constitution, this course of action cannot be ignored in spite of its impracticality. It is quite conceivable that the states will be unable to convince Congress to alter its internal processes to reflect a heightened awareness and regard for the role of the states in our constitutional structure. Such changes in the institutional decisionmaking process of the federal government to ensure the protection ler 1987] .nd of the states' ability to govern could, however, be achieved through the amendment process. Alternatively, the states could seek to amend the Constitution so that the Tenth Amendment would explicitly guarantee their powers in much the same way that the other nine amendments of the Bill of Rights protect the rights of individuals. of IIp tId ed )n tIg n~r, 'al ld to bn- of be an Its he to ve tly by HOUSE - No. 6133 67 Civil Resistance by State Officers An admittedly extreme approach to responding to the Garcia decision involves respectful disobedience of federal regulations that states consider intrusions into their sphere of authority. When convinced that a federal mandate or grant stipulation represents an unconstitutional encroachment on the sovereign power ostensibly guaranteed them by the Constitution, states might instruct their officers to resist the offending requirement. The purpose of such civil disobedience would be to direct attention to what is perceived as a constitutional crisis that must be resolved to the satisfaction of the states. The message sent by such a response would be clear: The Garcia Court has ignored the plain meaning of the Tenth Amendment (as argued by the dissenters) or ... the design and subsequent alteration of the Constitution has progressively caused the position of the states to deteriorate, demanding a renegotiation of the federal bargain. 49 ENDNOTES 1. Certain employees who, under FLSA guidelines, could be categorized as political, executive, administrative or professional employees remained exempt. 2. Minimum Wage and Maximum Hours Standards Under the Fair lAbor Standards Act, Department of Labor (April, 1986). 3. 51 Federal Register 25710 (July 16, 1986). 4: Id. tie its ,Ie a ur n>n 5. Hearings were also conducted by the Joint Economic Committee and the Subcommittee on Labor Standards of the House Committee on Education and Labor. 6. Two identical bills were filed in the House of Representatives by Congressmen Hammerschmidt of Arkansas and Loeffler of Texas. Eighteen bills, in total, were filed in response to the Garcia ruling. 7. William T. Waren, "The Garcia decision and the Fair Labor Standards Act Amendment," NCSL State-Federal Issue Brie/(October, 1986}. 8.Id. 68 HOUSE - No. 6133 [October 9. Public Law 99-150 10. All workers who can be categorized under FLSA guidelines as executive, administrative or professional employees were already exempt. 1 4: 4: 11. $313 million estimated for the year, April, 1987 - March, 1988. 12. Estimate for calendar year 1984. 4: 13. L. Thomas Linden, "The Fair Labor Standards Act and Local Government: A Summary of the FederalLaw's Requirements," The Beacon (September, 1985), p. 8. 4 14. Fields, supra, among others. 15. Lynch, supra, at 99. 16. ACIR (Feb., 1986), supra, p. 4. 17. Van Alstyne, supra, at 1716. 18. U.S. Const., Art. I, s. 8, cl. I. 19. Status of Federalism, supra, at 35. 20. Id. at 33. 21. Id. at 36. 22. Id. 23. Repeal of Prohibition. 24. 107 S. Ct. 2793 (1987). 25. Helvering v. Davis, 301 U.S. 619, 640 (1938); United States v. Butler, 297 U.S. 1,66 (1936). 26. Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 17 and F.N. 13 (1981). 27. Massachusetts v. United States, 435 U.S. 444, 461 (1978) (plurality' opinion); Ivanhoe Irrigation District v. McCracken, 357 U.S. 275, 295 (1958). 28. Lawrence County v. Lead-Deadwood School District, 469 U.S. 256, 269 (1985). 29. Steward Machine Co. v. Davis, 301 U.S. 548,595 (1937): 30. 107 S. Ct., F.N. 3. 31. National Conference of State Legislatures Annual Meeting, Legal Services Staff Section session on "South Dakota v. Dole: The Federal Government's Power of Conditional Grants. 32. /d. 33. Garcia v. San Antonio Metropolitan Transit Authority, 105 S. Ct. 1005, 1037 (O'Connor, J., dissenting), quoting New York v. United States" 326 U.S. 572, 583 (1946). 34. Paraphrasing Bruce E. Fein, "A Reagan Supreme Court: Restoring Constitutional Dignity to the States," State Legislatures (June, 1985), p. 21. 35. Status of Federalism, supra, p. I. 36. Id. 37. Id. at 59. 38. Garcia v. San Antonio Metropolitan Transit Authority, 105 S. Ct. 1005, 1035 (O'Connor, J., dissenting). 39. 105 S. Ct. 1005, 1018. 40. 1 Cranch 137 (1803). 41. Filed May 2, 1986. 4' 41 4~ er 1987] HOUSE - No. 6133 69 42. Friedman, supra. ve 43. A. E. Dick Howard, "Garcia: Federalism's Principles ~orgotten," Intergovernmental Perspective (Spring/ Summer 1985), p. 14. 44. Field, supra, at 104, 5. .ry 45. See Status of Federalism, supra for a complete discussion of this suggested response as well as most of the others discussed in this section . 46. National League of Cities v. Usery, 426 U.S. 833, 845 quoting Coyle v. Oklahoma, 221 U.S. 559,580 (1911). 47. 426 U.S. 833,852. 48. [d. at 1018. 49. ACIR (Feb., 1986), supra, p. 42. i). m .s. Ir, ty ·r, 70 HOUSE - No. 6133 [October APPENDIX DRAFT OF PROPOSED EXECUTIVE ORDER ON FEDERALISM (Source: U.S. Department of Justice) EXECUTIVE ORDER _ _ FEDERALISM By the authority vested in me as President by the Constitution and laws of the United States of America, and in order to restore the division of governmental responsibilities between the national government and the States that was intended by the Framers of the Constitution and to ensure that the principles of federalism established by the Framers guide the Executive departments and agencies in the formulation and implementation of policies, it is hereby ordered as follows: Section 1. Fundamental Federalism Principles. In formulating and implementing policies that have federalism implications (regulations, legislative comments or proposed legislation, and other policy statements or actions that have substantial direct effects on State or local governments, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government), Executive departments and agencies shall be guided by the following fundamental federalism principles: (a) Federalism is rooted in the knowledge that our political liberties are best assured by limiting the size and scope of the national government. (b) The people of the States created the national government when they delegated to it those enumerated governmental powers relating to matters beyond the competence of the individual States. All other sovereign powers, save those expressly prohibited the States by the Constitution, are reserved to the States or to the people. (c) The constitutional relationship among sovereign governments, State and national, is formalized in and protected by the Tenth Amendment to the Constitution. (d) The people of the States are free, subject only to restrictions in the Constitution itself or in constitutionally authorized Acts of Congress, to define the moral, political, and legal character of their lives. »er nd .he lal he ;m nd IS nd 1S, cy or Lal ad ve ag les Lal en ag .er he ts, th m of ~lr 1987] HOUSE - No. 6133 71 (e) In most areas of governmental concern, State and local governments uniquely possess the constitutional authority, the resources, and the competence to discern the sentiments of the people and to govern accordingly. In Thomas Jefferson's words, the States are "the most competent administrations for our domestic concerns and the surest bulwarks against antirepublican tendencies." (f) The nature of our constitutional system encourages a healthy diversity in the public in the public policies adopted by the people of the several States according to their own conditions, needs, and desires. In the search for enlightened public policy, individual States and communities are free Jo experiment with a variety of approaches to public issues. (g) Acts of the national government - whether legislative, executive, or judicial in nature - that exceed the enumerated powers of that government under the Constitution violate the principle of federalism established by the Framers. (h) Policies of the national government should recognize the responsibility of - and should encourage opportunities for individuals, families, neighborhoods, local governments and private assoCiations to achieve their personal, social, and economic objectives through cooperative effort. (i) In the absence of clear constitutional or statutory authority, the presumption of sovereignty should rest with the individual States. Uncertainties regarding the legitimate authority of the national government should be resolved against regulation at the national level. Section 2. Federalism Policymaking Criteria. In addition to the fundamental federalism principles set forth in section I, Executive departments and agencies shall adhere, to the extent permitted by law, to the following criteria when formulating and implementing policies ~hat have federalism implications (as defined in section I): . (a) There should be strict adherence to constitutional principles . Executive departments and agencies should closely examine the constitutional and statutory authority supporting any Federal action that would limit the policymaking discretion of the States, and should carefully assess the necessity for such action. To the extent practicable, the States should be consulted before any such action is implemented. Executive Order No. 12372 ("Intergovernmental Review of Federal Programs'') remains in effect for the programs and activities to which it is applicable. 72 HOUSE - No. 6133 [October (b) Federal action limiting the policymaking discretion of the States should be taken only where constitutional authority for the action is clear and certain and the national activity is necessitated by the presence of a problem of national scope. For the purposes of this Order: (1) It is important to recognize the distinction between problems of national scope (which may justify Federal action) and problems that are merely common to the States (which will not justify Federal action because individual States, acting individually or together, can effectively deal with them). (2) Constitutional authority for Federal action is clear and certain only when authority for the action may be found in a specific provision of the Constitution, there is no provision in the Constitution prohibiting Federal action, and the action does not encroach upon authority reserved to the States. (c) With respect to national policies administered by the States, the national government should grant the States the maximum administrative discretion possible. Intrusive, Federal oversight of State administration is neither necessary nor desirable. (d) When undertaking to formulate and implement policies that have federalism implications, Executive departments and agencies shall: (I) Encourage States to develop their own policies to achieve program objectives and to work with appropriate officials in other States. (2) Refrain, to the maximum extent possible, from establishing uniform, national standards for programs and, when possible, defer to the States to establish standards. (3) When national standards are required, consult with appropriate State elected officials in developing those standards. Section 3. Special Requirements For Preemption. (a) To the extent permitted by law, Executive departments and agencies shall construe a Federal statute to preempt State law only when the statute contains an express preemption provision or there is some other firm and palpable evidence compelling the conclusion that Congress intended preemption of State law, or when the exercise of State authority directly conflicts with the exercise of Federal authority under the Federal statute. )er 1987] :es (b) Executive departments and agencies shall construe Federal statutes authorizing issuance of regulations as authorizing preemption of State law by rulemaking only when the statutes expressly authorize issuance of preemptive regulations. (c) Any regulatory preemption of State law shall be restricted to the minimum level necessary to achieve the objectives of the statute pursuant to which the regulations are promulgated. (d) As soon as an Executive department or agency foresees the possibility of a conflict between State law and Federally protected interests within its area of regulatory responsibility, the department or agency shall consult, to the extent practicable, with appropriate State elected officials in an effort to avoid such a conflict. (e) When an Executive department or agency proposes to act through adjudication or rulemaking to preempt State law, the department or agency shall provide all affected States notice and an opportunity for appropriate participation in the proceedings. Section 4. Special Requirements For Legislative Proposals. Executive departments and agencies shall not submit to Congress legislation that would: (a) Directly regulate the States in ways that would interfere with functions essential to the States' separate and independent e~istence, operate to directly displace the States' freedom to structure integral operations in areas of traditional governmental functions, or otherwise violate the constitutional principles of state sovereignty enunciated by the Supreme Court in National League of Cities v. Usery, 426 U.S. 833 (1976) - principles which are essential to the vitality of federalism and must therefore be followed by Executive departments and agencies, regardless of whether they will be enforced by the Supreme Court (see Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985); (b) Attach to federal grants conditions that are not directly related to the purpose of the grant; or (c) Preempt State law, unless preemption is consistent with the fundamental federalism principles set forth in section 1, and unless a clearly legitimate national purpose, consistent with the federalism policymaking criteria set forth in section 2, cannot otherwise be met. Section 5. Agency Implementation. (a) The head of each Executive IS he lIS ns ns 'al an .m )n )n )n b.e m of at es ve er Ig er te nt le rlS ld ~d ty Ie HOUSE - No. 6133 73 74 HOUSE - No. 6133 [October department and agency shall designate an official to be responsible for ensuring the implementation of this Order. (b) In addition to whatever other actions the designated official may take to ensure implementation of this Order, the designated official shall determine which policies have sufficient federalism implications to warrant the preparation of a Federalism Assessment (as described in subsection (c) of this section). The department or agency shall consider any such Assessment in formulating and implementing the policy. If the policy is submitted to the Office of Management and Budget pursuant to Executive Order No. 12291 or OMB Circular No. A-19, it shall be accompanied by a copy of any such Federalism Assessment. (c) Each Federalism Assessment shall discuss and evaluate the following matters, to the extent relevant: (1) The application of the principles, criteria, and requirements stated in sections 1 through 4 of this Order to the policy being assessed; (2) The content and results of consultation with officials and organizations representing States affected by the policy; (3) The nature of the internal agency federalism review to which the policy has been subject; (4) The efforts the States have taken to address the problem that is the subject of the policy; (5) The extent to which the policy imposes additional costs or burdens on the States; (6) The extent to which the policy would affect the States' ability to discharge traditional State Governmental functions, or other aspects of State sovereignty; (7) The effect of the policy on the S~ates' ability to innovate and experiment with solutions to the problem that is the subject of the policy; and (8) The overall effect of the policy on the distribution of sovereign power and responsibilities among the various levels of government; and (9) The factors necessitating a national solution, if such is called for by the policy. Section 6. Government-wide Federalism Coordination and Review. (a) In implementing Executive Order Nos. 12291 and 12498 and )er lIe ay ial Ins ed all he nd ar ;m he 1tS :d; nd ch Lat or ity Ler nd he gn nt; 1987] HOUSE - No. 6133 75 OMB Circular No. A-19, the Office of Management and Budget may, to the extent permitted by law and consistent with the provisions of those authorities, take action to ensure that the policies of the Executive departments and agencies are consistent with the principles, criteria, and requirements stated in sections 1 through 4 of this Order. (b) In submissions to the Office of Management and Budget pursuant to Executive Order No. 12291 and OMB Circular No. A-19, Executive departments and agencies shall identify proposed regulatory and statutory provisions that have significant federalism implications and shall address any substantial federalism concerns. Where the departments or agencies deem it appropriate, substantial federalism concerns should also be addressed in notices of proposed rule making and messages transmitting legislative proposals to Congress. (c) Not later than December 31 of each year, each Executive department and agency shall submit a report to the President describing in detail the significant federalism issues it faced during the preceding fiscal year. The report should identify both accomplishments and failures with respect to federalism that occurred during the fiscal year, as well as any substantial concerns expressed by the States during the fiscal year and the department or agency's response to such concerns. The report should also identify and discuss, to the extent practicable, federalism issues that the department or agency anticipates facing during the current fiscal year. The Domestic Policy Council shall prepare an annual summary of these reports for the President. After presentation to the President, the summary shall be made available to the States, the Congress, and the pUblic. Section 7. Judicial Review. This Order is intended only to improve the internal management of the Executive branch, and is not intended t~ create any right or benefit, substantive or procedural, enforceable at law by a party against the United States, its agencies, its officers, or any person. THE WHITE HOUSE, ed rzd nd Author's Note: Subsequent to the filing of this report, the foregoing draft, with slight changes in substance and form [new s.l containing definitions; minor revisions in ss. 3(b), 4(a), 5(b) and (c), and 6(a); 6(c) deleted] was signed by President Reagan on October 28, 1987. This Document Has Been Printed On 100% Recycled Paper.