Federal Budget and Intergovernmental
Fiscal Issues: can the twain meet?
The evolution of fiscal interdependence
and conflict
Dual Federalism
Cooperative Federalism
Coercive Federalism
Contentious Federalism
Trends in federal grants
Total Outlays to State and Local Governments
by Category (1948-2013)
400.0
300.0
250.0
200.0
Payments for Individuals
Capital Investment
150.0
Remainder
100.0
50.0
Source: FY15 OMB Historical Tables, Table 12.1
2013
2008
2003
1998
1993
1988
1983
1978
1973
1968
1963
1958
1953
0.0
1948
In Billions of Constant FY09 Dollars
350.0
Rise of Federal Mandates
G
N
T
C
R
AC R T
A
Polarization and the federal system: Variable
speed federalism
• Mandate resistance – Real ID, NCLB, Medicaid
mandates
• Opt out = conservative states who decline to
participate in Medicaid expansion, health exchanges,
Race to the Top, high speed rail
• Partial preemption – states with more stringent rules
in air pollution, carbon dioxide and banking
regulation
5
Vertical Equalization: The Obama
Stimulus
GAO State and Local Simulation
State sales tax bases have been eroding
8
State and Local Pension Costs as shares of
budgets
9
Deinstitutionalization of IGR
• 1980
–
–
–
–
–
• 2013
ACIR
– CBO cost estimation
OMB
– GAO
GAO
– Whither state and local
Congressional IGR subcommittees groups?
Academy for State
and Local Government
Federalism in an Age of Austerity
 Go it alone federalism
 Partial and ineffective solutions
 Public confusion
 Cost shifting
 Unfunded mandates
 Fiscal substitution
 Fiscal coordination
 Win-win strategies
 VAT
 Sorting out responsibilities
Centralizing Effects of Deficit Commission
Proposals
 Reduced discretionary budgets will prompt cuts in
federal grants
 Tax expenditures reexamined
 State and local deduction
 Tax exempt bonds
 Cost shifts and mandates
 Extend social security coverage
 Revenue nationalization - VAT
 Cap and consolidate
 Medicaid long term care
 Homeland security grants
A Federalism reform agenda?
•
Tax policy
– Tax expenditure reform
– Consumption taxation
– Tax base sharing
•
Grants
– Sorting out
– Consolidation/performance grants
– Targeting
•
Regulatory
– Unfunded mandates act
– Performance outcomes
– Variable speed federalism
•
Institutions
– National/federal for engagement
– Fiscal impacts
– State capacity for engagement