FEDERAL GRANTS AND FEDERALISM

Terms of Local Governance

o Legally a city is a municipal corporation or municipality that has been
chartered by a state to exercise certain specific services
o There are two kinds of charters:
Special-act charter-applies to a certain city and lists what that
city can and cannot do
General-act charter-applies to a number of cities that fall within
a certain classification, usually on a city population
o Dillons rule- authorizes a municipality to exercise only those powers
expressly given, implied, or essential to the accomplishment of its
enumerated powers
o Home-rule charter- what most cities use, reversed Dillons rule and
allows a city to do anything that is not prohibited by the charter or
state law
City laws (called ordinances) cannot be in conflict with state
laws, and the states can pass laws to preempt or interfere with
what home-rule cities want to do
o Counties are the largest territorial units between a state and a city or
town
o Every state but Connecticut and Rhode Island has county
governments.
In Louisiana counties are called parishes, in Alaska boroughs
NYC also has boroughs
State Sovereignty
o Police power- laws and regulations not otherwise unconstitutional that
promote health, safety and morals
This includes: enforcing criminal codes, requiring children to
attend school and citizens to be vaccinated
o Initiative-allows voters to place legislative measures (and sometimes
constitutional amendments) directly on the ballot by getting enough
signatures
o Referendum-a procedure that enables voters to reject a measure
adopted by the legislature. Sometimes the state constitution specifies
that certain kinds of legislation must be subject to a referendum
whether the legislature wishes it or not
o Recall-used by 20 states, voters can remove an elected official from
office. If enough signatures are gathered on a petition, the official
must go before voters, who can vote to keep the person in office or
replace them with someone else
Federal/State Relations
o Federal Grants-in Aid
Grants-in-aid programs are grants of federal money or other
resources to the States and/or their cities, counties, and other
local units
 Began before the Constitution with land and cash grants to
states
Were attractive to state officials for various reasons
Access to Federal money during a time when the
government had huge budget surpluses (1880s high
tariffs)
Introduction of the Federal income tax in the 1920s
Federal control of money supply
Appeared as free money for stat officials-States were not
responsible for the money (collecting or proposing)
Federalism Today
o Although federal aid to the states has increased every year since 1950,
it has remained level or has declined slightly over the last few years as
a percentage of federal budget outlays.
o Federal regulation of state governments is usually accomplished
through attaching conditions to grants it gives states.
o It is the main instrument the national government uses to influence
state governmental policies.
o Grants in the various categories, may be project grants, which are
awarded on the basis of competitive applications.
o Congress appropriates money for three types of grants-in-aid:
Categorical Grants
Are made for some specific, closely defined purpose, such
as school lunch programs or the construction of airports
or water treatment plants. There are usually conditions,
or strings, attached to regulate the use of these funds.
Annually, they account for about 90 percent of all federal
grants.
There are 618 separate grant programs administered by
federal agencies in 1999.
Requires some matching funds based on the ability of the
state to pay, by applying an equalization principle.
o Equalization is a formula for federal matching
requirements that takes into account the states or
communitys ability to pay.
o This process allows poor states and localities to put
up relatively less matching money than rich states
and localities.
o This matching requirement is a federal requirement
that state or local governments must put up some
of their own funds in order to get federal money.
Block Grants
The portions of money allocated to States to use for
broader purposes, such as health care, social services, or
welfare. Block grants often are granted with fewer strings
attached.
 They are given more or less automatically to states or
local communities, which have discretion in deciding how
to spend the money.
They were created largely as a response to complaints
from state and local governments about the paperwork
and requirements attached to most grants.
They accounted for approximately 10 percent of all grants
in fiscal year 1999.
Major block grants included those for community
development, social services, health care, employment,
and training and education.
Project Grants
Are provided to States, localities, and sometimes private
agencies that apply for them.
They are used for a variety of purposes ranging from
medical research to job training and employment
programs.
General Revenue Sharing
o Revenue Sharing
Used between 1972 and 1987, gave an annual share of federal
tax revenues to the States and their local governments.
States and localities could use grants as they wished.
Local officials loved it because they saw it as new money for city
budgets, with few strings attached.
The program was discontinued in 1986, largely due to
mismanagement of funds by states and local communities.
Mandates
o Sometimes the federal government imposes its will upon the states by
requiring compliance with a federal mandate.
o In times past, the government has required states to carry some of the
federal workload but has refused to provide the money or other
resources to complete the task.
o This is called an unfunded mandate.
o Unfunded Mandates
An unfunded mandate is a statute or regulation that requires a
state or local government to perform certain actions, yet
provides no money for fulfilling the requirements.
When a federal government imposes a law or regulation without
necessary funding, it becomes the responsibility of the state or
local government to pay for the implementation of the law.
In the end, it is local taxpayers who end up footing the bill.
o UMRA
March 15, 1995 the Unfunded Mandates Reform Act (UMRA) was
enacted, setting procedures to keep Congress from imposing
costs on states without appropriating funds.
The UMRA requires analysis of any bill expected to cost state,
tribunal, or local governments more than US$50 million.
 The Congressional Budget Office (CBO) must perform this
analysis. The same type of analysis is required for bills
projected to cost the private sector US$100 million or more.
If a mandate is expected to cost lower levels of government or
the private sector more than US$100 million, house and senate
committees are required to show where funding will come from
to offset these costs.
If a committee fails to provide this information, the bill can be
removed from consideration. However, a majority vote can keep
such a bill alive, resulting in an expensive unfunded mandate.
Best known example of an expensive mandate is the No Child
Left Behind Act
o 1981
In 1981, President Reagan asked Congress to consolidate 83
categorical grants into 6 block grants.
The Reagan era cutbacks in the amount of federal money, and
the threat of more to come, led many governors and mayors to
find new ways of delivering old services.
Example: many cities turned over trash collection and
other tasks to private firms.
In the 190s the cutback in federal aid was made easier to bear
because the economy brought in more tax money to the states
without having to raise new taxes.
During the 1990s states struggled to make ends meet.
o A Devolution Revolution
The election of Republican majorities in the House and Senate in
1994, renewed efforts led by Congress to shift important
functions back to the states.
The key first issue was welfare (Aid to Families with Dependent
Children-AFDC)
Since 1935, there had been a federal guarantee of cash
assistance to states that offered support to low-income,
unmarried mothers and their children.
AFDC had become controversial as the number of women using
it and the proportion of births out of wedlock rose dramatically.
President Clinton vetoed the first two bills to cut it back but
signed the third
It ended any federal guarantee of support and, subject to certain
rules, turned management of the program entirely over to the
states, aided by federal block grants
Its rules said that every aided woman should begin working
within two years and no woman could receive benefits for more
than five years
These and other Republican initiative were part of a new effect
called Devolution, which aimed to pass on to the states many
federal functions.
o Block Grants for Entitlements
 There are three types of block grants
Operational: for purposes such as running state child-care
programs
Capital: for purposes such as building local wastewater
treatment plants
Entitlement grants: for transferring income to families and
individuals
The federal governments two biggest grant-in-aid programs
AFDC (often referred to as welfare), Medicaid (finances the
majority of medical and long-term care services for low-income
and disabled adults and children) were not created as block
grant programs
In the end the devolution revolutionaries of the 104 th Congress
did not succeed in turning Medicaid into a block grant program
The devolution of federal welfare programs has triggered
second-order devolution: a flow of power and responsibility from
the states to local governments
Third-order is the increased role of nonprofit organizations and
private groups in policy implementation.
With fewer people on welfare rolls receiving cash assistance,
states amassed billions of dollars in unspent federal welfare
funds.
In the late 1990s, these so-called welfare surpluses together
with booming economic conditions in many places, permitted
most states to increase spending
By 2002 most states were dealing with serious budget deficits
and raided their fiscal reserves because of:
Growth in state Medicaid costs fueled in part by new
federal laws making the program more generous and
covering more people, created a shortfall in revenues
States that were projected to receive tobacco-settlement
payments from big cigarette companies did not
9/11 cost factors
o Whats Driving Devolution?
House Republicans who spearheaded the devolution effort
harbored a mistrust of federal governments closer to the people
could control and adjust wasteful programs
By 1994 many governors of both parties were convinced that
the time had come to let states decide how best to address
social problems
Congressional Republicans sought not only to fund entitlement
programs with block grants instead of categorical grants but
also to make major cuts in entitlements spending