Fiscal Federalism
The system of distributing federal money to
state governments.
The power of the national government to
influence state policies through grants
The federal government holds purse strings.
Conditions of Aid:
Requires states to spend grant money
in certain way if they want to receive
federal funding.
EX: Feds give aid to states if states
lower speed limits or legal drinking
limit
How does the Fed entice states to cooperate?
• Grants
• Mandates
• Bargaining for pork
spending
Federal Grants-in-aid:
federal funds allocated
to states and local
governments for specific
purposes
Categorical Grants: funds specific programs
•
Funding split between state/fed matching
•
Amount matched by fed based on formula:
state’s wealth, needs and demographics
•
Programs to fight crime, improve streets,
special education programs, etc.
Ex: Family Planning Funding in Iowa
10% costs paid by Iowans, 90% paid by federal
funds
Categorical Grants (Formula Grant):
• Uses data (usually income) to calculate
“formula”
• If you fit into the formula, you qualify
Ex: Unemployment, Welfare, Pell Grants
Categorical Grants (Project Grant):
Awarded on the basis of competitive
application
Ex: Education (Race to the Top),
Highways, Scientific Research
Block Grant:
• Large grant
• Used for broad general purpose: “Public
Health”, “Crime Control”
• Allows states to decide how they use that
money toward purpose
• Pads state budget (Revenue Sharing)
3 Types of Block Grants
• operational (run programs)
• capital (buildings/services)
• entitlements (Money to poor/unemployed/Medicaid)
Mandates: Specific requirement from
federal gov
State/Local must implement policy or
program
Mostly unfunded
States can do this to local too
What are the pros and cons of mandates
onto the states?
American with Disabilities Act, 1990
(Example of Federal Mandate) DON’T WRITE
The Americans with Disabilities
Act (ADA) protects the rights of
people with disabilities.
Problems with
implementation?
It affects access to employment;
state and local government
programs and services; access to
places of public accommodation
such as businesses,
transportation, and non-profit
service providers; and
telecommunications.
What type of grant is needed most in your
community? DON’T WRITE
Think of a problem or need in your
community.
What kind of grant could help solve
this problem?
Block?
Formula?
Project?
What kinds of agencies,
departments, and/or
organizations would benefit
from the grant you have
selected?
What kind of conditions would
you attach to your grant?
Pork Barrel Spending
Legislators earmark funds for projects, programs, and
special interests in their state
“Bring home the Bacon”
100 Senators
435 House Members
Tax $$ from 300+ million Americans
What could go wrong?
Grants try to limit the practice of pork spending
Examples of “Pork” Spending—which states
do they benefit? DON’T WRITE
$84,000 to study why people fall in love
19 million to examine gas emissions from cow flatulence
$219,000 to teach college student how to watch television
$800,000 for a restroom on Mt. McKinley
IA State Fair Biggest Boar
2014; Lots of Fat!
1.2 million to study the breeding habits of a woodchuck
$2.5 million for potato research. Split between
Idaho, Maryland, Maine and Wisconsin, $1.5
million of the cash will go to the competitive
potato breeding research program, $700,000 to
potato pest management, and $350,000 to the
potato cyst nematode special research grant.
$4.8 million for wood utilization research. The Wood
Utilization Research Centers (WUR) is a special grant
program meant to increase competitiveness, utilize
wood to advance energy independence, and "enable
sustainability," according to the WUR website. Proposed
by representatives from 11 states.
$7.2 million to the Harkin Grant Program. Proposed by
Senator Tom Harkin of Iowa. Harkin originally asked for
$10 million for his self-titled program benefiting Iowa's
public schools
$100,000 to study the HatfieldMcCoy feud
$100,000 to study how to avoid a
falling spacecraft
$1 million to preserve a sewer in
Trenton, NJ as a historic monument
$57,000 by the Executive branch for
gold-embossed playing cards on Air
Force Two
$160,000 to study if you can hex an
opponent by drawing an X on his
chest
For ever one dollar an
average Iowan contributes to
federal taxes, they receive
back $1.31 in federal benefits.
Benefits include: Medicare,
SS, Medicaid, Income
Assistance, Unemployment,
Veterans Benefits, Education
Assistance, Utilities
Assistance, etc.
Check-In
QW: Identify and describe a situation in
which the federal government uses
fiscal federalism to increase their power
over the states.
* Can’t use highways and speed limit.