1. Grants-in-aid
Grants show how political realities modify legal authority.
Grants dramatically increased in scope in twentieth century.
Prevailing constitutional interpretation until late 1930s:
federal government can’t spend money for purposes not authorized by Constitution
grants a way around this.
Grants were attractive to state officials for various reasons:
Federal budget surpluses & tax increased revenues
Federal control of money supply
Appeared as “free” money for state officials, who did not have to be responsible for federal taxation.

2. Cooperative federalism
A model of federalism in which the states and national government cooperate in solving complex common problems, emphasizes an expanded role for the national government.
The New Deal and Cooperative Federalism.
Response to the Great Depression, implemented social-welfare programs designed to alleviate the bad economic times.
Dual federalism, in contrast, had held that programs such as relief for the poor were entirely outside of the federal role.
Supreme Court struck down dozens of New Deal programs as unconstitutional
After “Court Packing Plan” Court ceased to interfere with attempts to legislate broadly under the commerce clause.
Why “Cooperative Federalism”? -- programs typically funded by the federal government, but administered by states and local governments, thus creating a cooperative framework for federalist relations.

3. Cooperative federalism
Methods of Implementing Cooperative Federalism.
Categorical Grants: grants to states or local governments that are for specific programs or projects.
Block Grants: federal programs that provide funds to state and local governments for broad functional areas
Federal Mandates: requirement in federal legislation that forces states and municipalities to comply with certain rules

4. Share of Nonmilitary Spending by the Federal, State, and Local Governments before and after the Passage of New Deal Legislation
SOURCE: Advisory Commission on Intergovernmental Relations, Significant
Features of Fiscal Federalism (Washington, D.C.: Government Printing
Office, 1979), 7.
Copyright © 2009Cengage Learning

5. Meeting national needs
1960s shift in grants-in-aid
From what states demanded To what federal officials considered important as national needs
Federal grants to state and local governments increased.
Purpose of federal funds changed.
The intergovernmental lobby
Hundreds of state and local officials lobby in Washington
U.S. Conference of Mayors
National Governors Association
National Association of Counties
National League of Cities
Purpose: to get more federal money with fewer strings

6. Where the Money Goes

7. Categorical vs. Block grants
Categorical grants
Specific purposes defined by federal law
Often require local matching funds.
Block grants (AKA special revenue sharing or broad-based aid)
General purposes with few restrictions
States preferred block to categorical grants; more autonomy.
Neither achieved goal of giving states more spending freedom
Did not grow as fast as categorical grants
Number of strings actually increased
General Revenue Sharing: provided money to states with no strings attached; ended in 1986

8. Categorical vs. Block grants
Block grants grew more slowly than categorical grants due to differences between political coalitions that supported each.
Federal officials, liberal interest groups, organized labor tend to distrust state government
Categorical grants give the national government more power.
Categorical grants are matters of life or death for various state agencies.
Supervising committees in Congress favored growth of categorical grants.

9. The Shift Toward Central Government Spending

10. Federal controls on state gov’t activities
Conditions of aid: tell state governments what they must do if they wish to receive grant money
traditional control -- Attached to grants; range from specific to general
Divergent views of states and federal government on costs and benefits of these conditions
each side attempts to pass on most of the cost to the other sides
Mandates: tell state governments what they must do
federal rules that states or localities must obey; generally have little or nothing to do with federal aid
EX: Civil rights & Environmental protection
May or may not be funded
Mandates more likely in policy areas that receive less federal funding
Waivers exempt some parties from federal mandates.
may also make it difficult for state/local governments to:
raise revenues & borrow funds
privatize public functions
may expose them to financial liability.
Controversial mandates may result from court decisions
state prisons, school desegregation, legalized abortion

12. The “New Federalism”
Beginning with President Nixon, the Republican Party championed devolution
the transfer of powers from the national government to state or local government
Most Americans favor devolution, but not if that means cuts in government programs that benefit most citizens
Federalism Today, it is not clear whether competing theories of federalism divide Republicans from Democrats.
Democratic president Bill Clinton ( ) signed legislation transferring significant control over welfare programs to the states
Republican president George W. Bush signed legislation that increased federal control over education and educational funding