86 Chapter 3Chapter 3 || Federa lismFedera lisminfluence the kinds of policies implemented at the state level. In theory, states have
large amounts of discretion in terms of determining who is eligible for Medicaid
or the fees paid to doctors. However, the promise of federal Medicaid funds comes
with program requirements that state agencies must meet in order to receive these
funds. This type of relationship may sound familiar. When your parents let you use
the car or lent you $50, was it “no strings attached”? Or did they expect something
in return—such as help with yard work or other chores? Fiscal federalism works the
same way, as the federal government tries to use its resources to gain control over
state policies.
An extreme version of fiscal federalism is coercive federalism, which is the use of
federal mandates or conditions to force or entice the states to change their policies to
match national goals or policies established by Congress. A related concept, federal
preemption, occurs when the federal government passes a law that overrides state
law or which makes it impossible for a state to enact its own statute. The Clean Air and
Clean Water Acts, the Americans with Disabilities Act (ADA) (which promotes making
public buildings and commercial facilities more accessible to those with disabilities),
and the Motor Voter Act (which requires states to provide voter registration services at
motor vehicle departments) are all laws that forced states to change their policies. The
laws most objectionable to the states are unfunded mandates, which require states
to do certain things but carry no federal money to pay for them. Republican criticism
of unfunded mandates in the 1990s led to passage of the Unfunded Mandate Reform
Act of 1995. This act made it more difficult for Congress to impose these mandates on
the states; it required a separate vote on mandates that imposed costs of more than $50
million, and it required a Congressional Budget Office estimate of exactly how much
such mandates would cost the states. Although this law could not prevent unfunded
mandates, Republicans hoped that bringing more attention to the practice would
create political pressure against such policies.Types of Federal Aid to States The method used to transfer resources from the
federal government to states and localities often determines the effectiveness of
fiscal federalism. Today, most federal aid comes in two forms. Categorical grants
are for specific purposes—they have strings attached. Funds that help states run their
Medicaid programs, for example, are delivered as categorical grants. Block grants
are financial aid to states for use within a specific policy area, but within that area
the states have discretion on how to spend the money. An example of a block grant is
TANF (Temporary Assistance for Needy Families), which is federal money given to
states to help fund their welfare programs. However, in contrast to Medicaid, federal
welfare funds are given without restrictions about how the states determine benefits
or the eligibility of welfare recipients. As a result, both of these factors vary across
states. Since the 1970s, grants to the states as a proportion of the size of the national
economy (gross domestic product, or GDP) have been relatively constant, whereas the
rate of state and local spending has continued to inch up (see the What Do the Facts
Say? feature).
Advocates of cooperative federalism often promote block grants as the best
way for the levels of government to work together to solve problems: the national
government identifies problem areas and then provides money to the states to
help solve them. The problem is that state governments may disagree with the
president or Congress on how these programs should be implemented, which creates
a temptation for the federal government to move to categorical grants as a way to
shape state policy.
A separate argument for block grants is made by people who believe that state
governments are more efficient at implementing policies—as well as people whocoercive federalism
A form of federalism in which the
federal government pressures the
states to change their policies by using
regulations, mandates, or conditions
(often involving threats to withdraw
federal funding).
federal preemption
Imposition of national priorities on
the states through national legislation
that is based on the Constitution’s
supremacy clause.
unfunded mandates
Federal laws that require the states to
do certain things but do not provide
state governments with funding to
implement these policies.categorical grants
Federal aid to state or local
governments that is provided
for a specific purpose, such as a
mass-transit program within the
transportation budget or a school
lunch program within the education
budget.block grants
Federal aid provided to a state
government to be spent within a
certain policy area, but the state can
decide how to spend the money within
that area.Full_04_APT_64431_ch03_070-101.indd 86 16/11/18 1:29 PM