1. Fiscal Federalism: The Federal Government Holds Purse Strings
the system of distributing federal money to state governments
the power of the national government to influence state policies through grants

2. How Do Grants (FREE $) Entice States to Cooperate?

3. federal grant: grants-in-aid; free money!
Grants-in-aid are federal funds allocated to states and local governments for specific purposes.
reasons for grants: abundant national government resources; local provision

4. Categorical Grants
Grants are for specific programs and funds matched by states.
Federal funds go to all the states on the basis of a formula depending on the state’s wealth and usually require that the state match the funds.
Used for programs to fight crime, improve streets, control air, special education programs, etc. Some categorical grants are considered formula grants too, such as Medicaid.
two types of categorical grants
restrictive to specific programs
big federal government

5. 1. formula grant: awarded based on whether you fit into the formula (welfare, unemployment)

6. project grant: awarded on the basis of competitive application
example: education programs, roads, highways, etc.

7. Three Types of Block Grant
block grant: large grant of money that can be used for a general purpose, such as public health or crime control; allows states more discretionary spending (also called revenue sharing)
Three Types of Block Grant
a) operational (run programs)
b) capital (buildings/services)
c) entitlements (money to poor/needy/AFDC, Medicaid)

8. mandates: formal order given by a higher authority (federal government) telling the state and local governments what programs to implement
What’s the problem with mandates? Most of them are unfunded, and states have to come up with their own money.
—They can cause states to have to spend money (prisons, schools, discrimination).
—To get money, states must comply with “conditions of aid.”

9. American with Disabilities Act, 1990: Example of Federal Mandate
The Americans with Disabilities Act (ADA) protects the rights of people with disabilities.
It affects access to employment; state and local government programs and services; access to places of public accommodation, such as businesses, transportation, and nonprofit service providers; and telecommunications.
Problems with implementation?

10. Conditions of Aid
Federal government will give states money IF they meet the conditions given to receive the aid.
States are required to spend grant money in certain ways if they want to receive federal funding.
—(Examples: The government will give money to states if they lower drunk driving limit, speed limits, etc.)

11. What Type of Grant Does Your Community Need Most?
Block?
Categorical?
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?

12. Despite the “sharing of power,” the federal government still limits state power. Why?
They use leverage and keep representatives from their states happy by using money and pork-barrel spending (using federal money for state and local projects).

13. Examples of “Pork” Spending: Which States Do They Benefit?
$84,000 to study why people fall in love
$19 million to examine gas emissions from cow flatulence
$219,000 to teach college students how to watch television
$800,000 for a restroom on Mt. McKinley
$1 million to study why people don’t ride bikes to work
$1.2 million to study the breeding habits of a woodchuck
$2 million to construct an ancient Hawaiian canoe
IA State Fair Biggest Boar 2014; Lots of Fat!

14. And there’s more . . .
$100,000 to study the Hatfield-McCoy 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 their chest

15. Dual vs. Cooperative Federalism
Dual Federalism
Each level of government has distinct responsibilities that do not overlap. States are sovereign.
Marbled (Swirl) Cake
Cooperative Federalism
Levels of government share responsibilities.
Layered Cake

16. From Dual to Cooperative Federalism
We are now cooperative (marbled cake, or fifty marbled cupcakes).
Cooperative federalism: Elements of national and state influence swirl around each other, without clear boundaries.
We were dual (layered) cake.
Each level of government had its own distinct role: national, state, and local.

17. So Is Federal or State Government Stronger?
Federal government is stronger. There are more strings for money now.