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No.

593 May 22, 2007


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Federal Aid to the States


Historical Cause of Government Growth and Bureaucracy
by Chris Edwards

Executive Summary

In recent years, members of Congress have spending and regulations, not on delivering
inserted thousands of pork-barrel spending proj- quality services. And by involving all levels of
ects into bills to reward interests in their home government in just about every policy area, the
states. But such parochial pork is only a small part aid system creates a lack of accountability. When
of a broader problem of rising federal spending on every government is responsible for an activity,
traditionally state and local activities. no government is responsible, as was evident in
Federal spending on aid to the states increased the aftermath of Hurricane Katrina.
from $286 billion in fiscal 2000 to an estimated The failings of federal aid have long been rec-
$449 billion in fiscal 2007 and is the third-largest ognized, but reforms and cuts have not been pur-
item in the federal budget after Social Security sued for years. Aid has spawned a web of inter-
and national defense. The number of different aid locking interests that block reform, including
programs for the states soared from 463 in 1990, elected officials at three levels of government,
to 653 in 2000, to 814 by 2006. armies of government employees, and thousands
The theory behind aid to the states is that fed- of trade associations representing the recipients
eral policymakers can design and operate pro- of aid.
grams in the national interest to efficiently solve Yet the system desperately needs to be scaled
local problems. In practice, most federal politi- back, not least because the rising costs of federal
cians are not inclined to pursue broad, national programs for the elderly are putting a squeeze on
goals; they are consumed by the competitive the federal budget. To help spur reform, this
scramble to secure subsidies for their states. At study examines the historical growth of the aid
the same time, federal aid stimulates overspend- system and describes its failings. Congress
ing by the states, requires large bureaucracies to should reconsider the need for aid and begin ter-
administer, and comes with a web of complex minating activities that could be better per-
regulations that limit state flexibility. formed by state and local governments and the
At all levels of the aid system, the focus is on private sector.

_____________________________________________________________________________________________________
Chris Edwards is director of tax policy studies at the Cato Institute and author of Downsizing the Federal
Government (2005).
The Tenth Introduction grants-in-aid and accompanying regulations.
Amendment Grants-in-aid (“grants” or “aid”) are subsidies to
Under the Constitution, the federal govern- state and local governments aimed at promoting
embodies ment has specific limited powers and most gov- particular activities such as highway building.
federalism, ernment functions are left to the states. Federal Federal granting began during the late 19th cen-
powers enumerated in the Constitution tury, expanded during the early 20th century, and
the idea that include those aimed at providing national secu- ballooned during the 1960s. Today, more than
federal and state rity and those designed to ensure an open 800 federal grant programs shower the states
governments each national economy. To make sure that people with hundreds of billions of dollars each year.
understood the limits on federal power, the What are the practical effects of this torrent
have separate Framers added the Constitution’s Tenth of aid and how has it altered the structure of
areas of activity Amendment: “The powers not delegated to the American government? This study looks at
and that federal United States by the Constitution, nor prohib- the role of policymakers and bureaucrats in
ited by it to the states, are reserved to the states the growth of aid and focuses on the failings
responsibilities respectively, or to the people.” of aid, which have been evident to policy ex-
are “few and The Tenth Amendment embodies federal- perts for decades. Federal aid has generated in-
ism, the idea that federal and state governments tense spending pressures and excess bureauc-
defined.” each have separate areas of activity and that fed- racy at all three levels of government.
eral responsibilities are “few and defined,” as Figure 1 illustrates the interlocking parts of
James Madison noted. Historically, federalism the federal aid system. Federal politicians create
acted as a safeguard of American freedoms. As programs that deliver funding to, and impose
President Ronald Reagan noted in a 1987 exec- regulations on, state and local governments.
utive order, “Federalism is rooted in the knowl- Those governments then consume a portion of
edge that our political liberties are best assured aid in employee wages and other administrative
by limiting the size and scope of the national costs and hand out billions of dollars to private-
government.”1 sector grantees and contractors. State and local
Unfortunately, policymakers and courts employees and private organizations, which
in recent decades have discarded federalism. benefit from aid, create unions and trade asso-
Congress has undertaken many activities ciations to lobby Congress and promote higher
that were traditionally reserved to the states spending to the public.
and the private sector. The Supreme Court The following sections discuss how these
has embraced looser readings of the limits on parts of the aid system work together to gen-
federal power over time. Indeed, after a num- erate bigger government. The first section pro-
ber of troubling Court decisions in the 1980s, vides a history of federal aid and presents data
a government commission on intergovern- on the expansion in the number of programs.
mental relations concluded that the rulings Then the roles of federal and state politicians
overturned “the long-standing doctrine that and lobbyists are examined. That is followed
the federal government is one of limited, del- by a discussion of the bureaucracies in the
egated power, thus opening the way for virtu- three levels of government that distribute aid
ally unfettered exercises of national power and deal with regulations. The conclusion
vis-à-vis the states and local governments.”2 summarizes why aid should be a priority tar-
Federal power has continued to expand get for federal budget cuts.
under the administration of George W. Bush.
Today, federal spending and regulatory activity
are directed to nearly any state and local activi- Federal Aid Has Grown
ty that suits the whims of Congress and execu- Massive and Complex
tive branch agencies.
The primary means that the federal govern- Prior to the Civil War, proposals to provide
ment uses to intervene in state activities are federal subsidies for state and local activities

2
Figure 1
The Federal Aid System

Federal government

Regulations 814 grant programs


and mandates
$449 billion in 2007

50 state governments
Lobbying by
88,000 local governments state and local
governments,
unions, and
Grants and Wages trade
contracts
associations

Businesses, 16 million
nonprofits, and employees
individuals

Trade associations Employee Organizations


and interest groups unions of governors
and mayors

Spending advocacy
Prior to the Civil
War, proposals to
Voters provide federal
subsidies for
state and local
were occasionally introduced in Congress, but “purely local character” and that funding activities were
they were routinely voted down or vetoed by would be a “subversion of the federal system.”4
presidents for being unconstitutional. In 1817 In 1854 President Franklin Pierce vetoed a bill routinely voted
President James Madison vetoed a bill that that would have provided aid to the states for down or vetoed
would have provided federal aid to construct the indigent insane, also citing federalism rea- by presidents
roads and canals.3 In 1830 President Andrew sons.
Jackson vetoed a bill to provide aid for a road Spending was dispersed in the states as a for being
project in Kentucky arguing that it was of side effect of federal activities such as troop unconstitutional.

3
When the deployments and Post Office services.5 And • The Federal Aid Roads Act of 1916 pro-
income tax was the federal government approved grants of vided aid to the states to build high-
land to the states for schools, roads, and ways, based on the premise that road
introduced in canal projects. Congress approved funding funding supported federal mail delivery.
1913, it provided from the proceeds of land sales to construct The federal government had not provid-
the historic National Road in 1806.6 But in ed funding to the states for roads since
the means for 1822 President James Monroe vetoed legisla- the subsidies for the National Road had
policymakers to tion for funding maintenance of the road ended in the 1830s.
finance a large because of constitutional concerns about • The Smith-Hughes Act of 1917 created
federal overreach. (The National Road was grants for teacher salaries and teacher
range of new handed over to the states in the 1830s.) training in vocational education.
federal aid However, there were no grant programs • The Chamberlain-Kahn Act of 1918
programs. that disbursed cash to the states for ongoing provided aid to the states for combating
activities. That started to change toward the venereal disease.
end of the 19th century. The Morrill Act of • The Fess-Kenyon Act of 1920 provided
1862 provided grants of federal land to the aid to the states for vocational rehabili-
states for the establishment of colleges that tation, or the training of persons who
focused on agriculture, mechanical studies, had been disabled in industry.
and the military. That was the first grant pro- • The Sheppard-Towner Act of 1921 pro-
gram with “strings attached.” It included vided aid to the states “for the promotion
detailed rules for recipients to follow, and it of the welfare and hygiene of maternity
required them to submit regular reports to and infancy.”
the federal government. (An earlier version of
the Morrill bill in 1859 raised a storm of Those seven early aid programs had fea-
protest about its constitutionality, and it was tures and faults that were similar to those of
vetoed by President James Buchanan.)7 today’s aid programs. All seven programs
In 1879 Congress provided funds to a pri- required the states to match federal funds on a
vate nonprofit group in order to distribute to dollar-for-dollar basis—federal aid was called
the states educational materials for the blind. the “fifty-fifty system.” As discussed below,
In 1887 the Hatch Act, the first cash grant matching requirements induce excess spend-
program, provided subsidies to the states for ing and divert state-source funds from other,
agricultural research.8 An 1888 act provided perhaps higher, priorities of each state. If states
aid to the states for veterans’ homes. A sec- are induced to spend more of their funds on
ond Morrill Act in 1890 began regular appro- farm subsidies, for example, they may have less
priations for the land-grant colleges. to spend on their justice systems.
Federal aid activity increased substantially The new aid programs usually mandated
in the early 20th century. The “dual federal- an expansion in state and local bureaucracies.
ism” of the 19th century was being replaced by Aid programs required the states to set up new
what became called “cooperative federalism.” boards and agencies to oversee government
When the income tax was introduced in 1913, spending on the prescribed activities. The
it provided the means for policymakers to 1916 act required states to create highway
finance a large range of new federal aid pro- departments; the 1917 act required the states
grams. Here are some of the early aid laws:9 to establish vocational education boards; the
1921 act required states to create children’s
• The Weeks Act of 1911 provided aid to bureaus; and so on. The states had to create
the states for forest fire prevention. detailed plans for their activities, file regular
• The Smith-Lever Act of 1914 provided reports to Washington, and be subject to
subsidies to land-grant colleges for agri- inspection by federal officials regarding their
cultural education. use of aid funds. Regarding the 1916 Roads

4
Figure 2
Number of Federal Aid Programs for the States

900
814
800
ACIR Data OM B Data
653
700
608
600
530
463
500
447 434
400
327 335
300

200
132
100 68 85
44
1 4 4 4 4 4 9 12 13 15 28 30
0
1879
1890
1895
1900
1905
1910
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975

1980
1985
1990
1995
2000
2006
Sources: Advisory Commission on Intergovernmental Relations, “Fiscal Balance in the American Federal System,” vol. 1, October 1967; and Office of
Management and Budget, Budget Systems and Analysis Division, “The Number of Federal Grant Programs to State and Local Governments: 1980 to
2004,” unpublished, April 8, 2005. The 2006 figure is author’s estimate based on OMB methodology.
Note: The ACIR data for 1980 through 1995 show about 60 more programs, on average, than the OMB data.

Act, a contemporary observer noted that it federal land sales in the states, which was long-
required the states to send a “vast amount of standing practice, but in practice the funds
detailed information” to Washington.10 came from regular appropriations. The 1916
There were other strings attached to the road subsidy law aimed to fund “post roads,” or
early aid programs. People began noticing those that were used for federal mail delivery,
that by funding just a portion of state activi- but Congress defined that extremely broadly.13
ties, the federal government was gaining con- The 1911 aid bill was supposed to fund state
trol over state policy in certain areas. For forest fire prevention only near navigable rivers,
example, through aid the federal government and that provided a constitutional pretence for
began influencing the employment policies those activities as being related to interstate
of the states.11 And in order to receive aid, commerce.14
states were often required to pass legislation Figure 2 shows the number of aid pro-
that regulated state and local activities in grams for the states beginning with the educa-
ways sought by Congress. For example, a tion program of 1879. By 1930 there were 15
highway aid act in 1921 brought pressure on federal aid programs. As Congress added and
the states to increase the powers of their expanded programs, the budget costs rose.
highway departments and expand controls Figure 3 shows that aid jumped from less than
over local road-building activities.12 1 percent of federal spending to more than 3
Various sleights of hand were used to get percent during the 1920s. The costliest aid
around constitutional concerns about expand- activity at that time was highway funding.
ed federal power. Funding for the 1890 Morrill It was getting harder to hold the line on
Act was supposed to come from the proceeds of federalism as politicians became increasingly

5
Figure 3
Federal Aid to the States, Share of Total Federal Outlays

18%
16.1%
15.5% 16.0%
16%
15.0% 14.8%
14%
12.3%
12%
11.2%
10.8%
9.2% 9.2%
10%
8.0%
7.6%
8%

5.3%
6%
4.7%
3.9%
4%
3.1%
2%
0.9%
0.6% 0.8% 0.5%
0%
1902 1912 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2007

Sources: Author’s calculations based on various sources (1902–35); and Budget of the United States Government: Fiscal Year 2008 (1940–2007).
Notes: Fiscal years. Data for 1935 were adjusted to exclude a temporary spike in aid. Note that the aid share falls in 1945 because defense spending
vastly increased the overall budget.

activist and new lobbying groups were estab- ciency of federal operations is impaired as
lished. Labor unions pushed for federal fund- their scope is unduly enlarged. Efficiency
ing of vocational education and succeeded of state governments is impaired as they
with the passage of the Smith-Hughes Act in relinquish and turn over to the federal
1917. The passage of the 1916 road bill was government responsibilities which are
preceded by the introduction of at least 62 dif- rightfully theirs. I am opposed to any
ferent road subsidy bills in Congress.15 State expansion of these subsidies. My convic-
highway officials had formed a national orga- tion is that they can be curtailed with ben-
nization in 1914 with an office in Washington efit, to both the federal and state govern-
to press for aid, and highway lobbying groups ments.18
helped draft the 1916 bill.16
Nonetheless, there was resistance to the Some leaders in the higher-income East
growth in aid, and the shortcomings of aid Coast states strongly opposed expansions in
programs were already becoming evident.17 aid. Gov. Albert Ritchie of Maryland said that
President Calvin Coolidge was a frequent and the “system ought to be abolished, root and
pointed critic of the aid system. In his budget branch” with the money “left in the states for
message for 1926, Coolidge declared: the states to use for their own local needs and
purposes.”19 But the less-populated states
I am convinced that the broadening of used their disproportionate power in the
this field of activity is detrimental both to Senate to vote for aid programs knowing that
the federal and state governments. Effi- their states would receive large benefits while

6
paying only a small part of the costs.20 Act of 1933 provided more than $3 billion to
Proponents of aid were persistent, and, as the states over two years for work relief.23 The
aid bills began to pass, new interest groups were main federal aid program for welfare, Aid to
formed and Congress began getting bombard- Dependent Children, was enacted in 1935.
ed with requests for subsidies of all kinds.21 A By 1940 the number of federal aid pro-
few states initially refused to take part in some grams had increased to 30, and aid spending
of the aid programs, but an observer at the time had soared to 9.2 percent of the federal budget.
said that most states “to get a few millions they By 1945 aid had fallen as a share of the budget
shamelessly barter away their birthright” of because defense spending had pushed overall
reserved powers under the Constitution.22 Of spending up. Figure 4 shows federal aid to the
course, it was politically difficult for states to states in constant dollars. It indicates that aid
opt out of federal subsidy programs because, if spending was fairly flat during the 1940s.
they did, their residents would still have to pay Federal aid expanded during the 1950s,
federal taxes to support the subsidies paid to with the number of aid programs almost dou-
other states. bling from 68 in 1950 to 132 by 1960. That
By the time President Franklin Roosevelt expansion occurred despite President Dwight
came to office, many legal and political prece- Eisenhower’s expressed concerns about feder-
dents had already been set for the large expan- alism. Eisenhower had established a commis-
sions in aid enacted under the New Deal. In sion in 1953 to identify federal activities that
the 1930s aid programs were created for pub- could be returned to the states, but unfortu-
lic housing, welfare, employment, and many nately no reforms were enacted.24 The largest
other activities. The Federal Emergency Relief new grant program during this era was the

Figure 4
Federal Aid to the States, Constant 2007 Dollars

250

200
Billions of Constant 2007 Dollars

150

Nonhealth Programs
100

Health Programs
50

0
1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Source: Author’s calculations based on Budget of the United States Government: Fiscal Year 2008.

7
Federal-Aid Highway Act of 1956, which au- Many policymakers and academics sup-
thorized $25 billion of spending over a decade port aid to the states because they see it as a
on the interstate highway system. way to advance the cause of wealth redistrib-
The Highway Act provides an illustration ution. Liberals prefer that government pro-
of how federal regulatory controls started grams be funded at the federal level because
coming as a package deal with federal dollars. the federal tax system is more graduated, or
The act imposed on all state highway projects “progressive,” than state tax systems. A schol-
that received federal money Davis-Bacon rules, ar of federal aid, Howard Chernick of Hunter
which mandated that construction workers be College, New York, begins one of his studies
paid “prevailing wages.” That usually had the on aid with a view common in academia:
effect of increasing labor costs on projects at
taxpayer expense. Because many states were In a decentralized federal system such as
already constructing their own highway sys- the United States, the realization of dis-
tems in the mid-1950s, one effect of the 1956 tributional goals requires the joint fiscal
act was to increase the costs of many highways effort and cooperation of several layers
that would have been built anyway. of government. If fiscal responsibility
Federal aid exploded during the 1960s. for redistribution were left entirely to
Federal aid Figure 2 shows that the number of aid pro- subnational levels of government, then
exploded during grams quadrupled from 132 in 1960 to 530 by states with weak fiscal capacity or limit-
the 1960s. 1970. Under President Lyndon Johnson, new ed preferences for redistribution might
aid programs were added for housing, urban choose benefits and levels of access that
The number of renewal, education, health care, environmental fall below minimum national standards
aid programs protection, and many other activities. The of adequacy.27
Congressional Research Service noted that
quadrupled from “more grant programs were enacted during the In Chernick’s view, apparently, it is imper-
132 in 1960 to Johnson Administration (1963–69) than in all missible for any state to have less of a prefer-
530 by 1970. preceding years in U.S. history combined.”25 ence for redistribution than Washington
There were 109 separate aid programs for the deems appropriate. Chernick presents the
states enacted in 1965 alone.26 problem of “weak fiscal capacity” as an
Aid spending rose from $48 billion in 1960 unavoidable disease that states cannot fix by
to $129 billion by 1970, measured in constant themselves with pro-growth economic policies.
2007 dollars. President Johnson called his Congress needs to step in and create “mini-
policies “creative federalism,” but his activism mum national standards” because some states
dealt a severe blow to the federalism of the are hopelessly weak and likely to make poor
nation’s Founders. By the end of the 1960s, choices if left to themselves. These sorts of
many policymakers believed that the federal views have been popular among proponents of
government should spend money on just aid since the beginning of the aid system.
about any activity that it wanted, and ques- The views of advocates of aid are infused
tions regarding constitutional propriety were with a belief in the “public interest theory of
seldom considered anymore. government,” which is the idea that policy-
The huge growth in federal aid in the 1960s makers act with the best interests of the broad
occurred for many reasons. Policymakers were general public in mind. In past decades, con-
fooled by the mirage that “federal resources” ventional wisdom held that the federal gov-
appeared to be limitless compared to the tax ernment could be effective and efficient at
revenues available to individual states. Of solving local problems. Are there poor people
course, the ultimate source of the federal and blighted buildings in your city? Let us use
money distributed to the states is the taxpayers the seemingly unlimited resources of the fed-
who live in the 50 states, but policymakers have eral government to hire experts, bulldoze the
always ignored this inconvenient truth. blight, and build modern high-rises to solve

8
the problem. That type of top-down thinking declined for a few years as the pace of program
was behind the creation of aid programs for creation slowed and some existing programs
urban renewal, housing, education, and many were consolidated. According to data from the
other activities. Advisory Commission on Intergovernmental
We know today that the federal govern- Relations, the number of programs declined
ment is not very good at solving local prob- to about 447 by 1975, then began climbing
lems, and fewer scholars believe in the public again to reach roughly 500 by 1980. However,
interest theory of government. Even casual different ACIR reports show somewhat differ-
observation of Congress reveals that policy- ent program counts during this period.
makers put the various narrow interests of While fewer new programs were added
their states above all else most of the time. during the 1970s, the cost of aid programs
Aid is the perfect tool to satisfy parochial spe- soared as spending on all the programs creat-
cial interests, and that is why the aid empire ed during the 1960s kicked into overdrive.
prospers today—not because experts believe Figure 4 shows that spending on aid for both
that it works well. health and nonhealth programs roughly
doubled during the 1970s, measured in con-
Growing Aid, Growing Problems stant dollars.
The unchallenged optimism of the 1960s President Richard Nixon took some modest
about the federal government’s ability to solve steps toward consolidating the burgeoning aid
state and local problems did not last. By the system into block grants. He understood that
late 1960s, budget analysts were becoming categorical grants were complex and promoted
alarmed at the growing complexity and over- special interest lobbying. Nixon argued that
lap of federal grants. Two of President federal aid had become a “terrible tangle” of
Johnson’s top economic advisers and other overlap and inefficiency.31 In his 1971 State of
experts began to push for consolidation of the Union address, Nixon lambasted “the idea
narrow “categorical” grants into broader and that a bureaucratic elite in Washington knows
more flexible “block” grants.28 best what is best for the people,” and he said President
Categorical grants fund a narrow range of that “the time has now come in America to Richard Nixon
eligible activities subject to detailed federal reverse the flow of power and resources from
rules that state governments are required to the states and communities to Washington.”32
argued that
follow. Until the 1960s, all grants were cate- Nixon’s reforms fell far short of his federal aid had
gorical grants, and the vast majority still are. rhetoric, and just a few of his “new federalism” become a
Categorical grants are very complex, and as far initiatives were enacted. Nixon succeeded in
back as the Hoover Commission in 1949 creating three block grants.33 In addition, an “terrible tangle”
experts had proposed replacing them with extreme form of block grant, “revenue shar- of overlap and
block grants.29 Block grants generally have ing,” was begun in 1972 to give funding to the
simpler rules and allow the states more flexi- states with almost no strings attached. The
inefficiency, and
bility. Both Presidents Harry Truman and problem was that revenue sharing did not sub- he said that “the
Dwight Eisenhower proposed block grants, stitute for existing grants—it was added on time has now
but those reforms were not enacted.30 top. Liberals generally supported Nixon’s rev-
Congress passed the first block grant in enue sharing because it shifted funding of the come in America
1966, which converted 16 existing health care welfare state from flatter state tax systems to to reverse the
grants into a single broader program. A block the more graduated federal system. Revenue flow of power
grant for law enforcement was enacted in sharing was abolished in 1986.
1968. But those small reforms were over- Consolidation of narrow grants into broad- and resources
whelmed by the avalanche of new categorical er block grants made sense to budget experts, from the states
grants being enacted in the late 1960s. The but members of Congress usually favored cate-
number of programs seems to have reached a gorical grants because they could be better tar-
and communities
temporary peak in the early 1970s and then geted toward special interests. The expansion to Washington.”

9
President Ronald of categorical grants was in sync with the to all but the most serious students of
Reagan tried to increasingly fragmented committee structure the system. . . . During the 1960s, the
in Congress in the mid-20th century. That is, explosion in the number of federal pro-
cut aid spending, the number of aid programs grew as the num- grams made shortcomings in the [aid]
convert existing ber of committees and subcommittees grew. system apparent. Studies showed that
Each committee and subcommittee wanted its red tape, delays, and vast amounts of
aid programs to own realm of programs to preside over. paperwork were characteristics com-
block grants, and During the 1970s, there were growing con- mon to most federal [aid] programs.40
transfer some cerns about the complexity of the mushroom-
ing federal aid system. A 1973 report by the Tax President Ronald Reagan came into office
activities back to Foundation noted that the proliferation and promising to respond to such concerns and to
the states. complexity of grants had “been accompanied revive federalism. He tried to cut aid spending,
by increasingly heavy criticism, even by sup- convert existing aid programs to block grants,
porters of expanded federal assistance.”34 On and transfer some activities back to the states.
the campaign trail in 1976, Jimmy Carter He was modestly successful with his first two
denounced the “awful federal bureaucracy.”35 goals. The Omnibus Budget Reconciliation Act
When he came into office he proposed a “con- of 1981 eliminated 59 grant programs and con-
centrated attack on red tape and confusion in solidated 80 categorical grants into 9 block
the federal grant-in-aid system.”36 Carter pur- grants.41 That consolidation substantially re-
sued a number of modest reforms, but like duced the regulatory burden of those pro-
Nixon he did a better job describing the aid grams, at least initially. For example, 33 educa-
problem than enacting solutions. tion programs were collapsed into one block
The bipartisan and highly respected Advi- grant, which reduced the length of related regu-
sory Commission on Intergovernmental Re- lations from 667 pages to just 20 pages.42
lations criticized many aspects of the federal However, Reagan was not successful in his
aid system through the 1960s, 1970s, and third goal. In 1982, under his “new federal-
1980s. In a report in 1978, the ACIR concluded ism” agenda, he sought to re-sort federal and
that “the reach of federal aid is sweeping. state priorities such that each level of govern-
Virtually every state and local activity can be ment would have full responsibility for cer-
assisted by some federal program.”37 In 1980 tain activities. For example, Reagan proposed
ACIR published an 11-volume study on feder- that welfare and food stamps be both
alism, which concluded that Washington’s financed and operated by the states.43 Reagan
power had become “more pervasive, more also proposed “turnback” legislation to end
intrusive, more unmanageable, more ineffec- about 40 federal programs. Thus he pro-
tive, more costly, and, above all, more unac- posed that the federal government end most
countable.”38 In an ironic twist, the ACIR, highway programs and cancel the federal
which was a rare government agency that criti- gasoline taxes that supported them.
cized government programs, was one of the In his 1983 budget message, Reagan argued
few agencies abolished by the Republicans in that “during the past 20 years, what had been a
the 1990s. classic division of functions between the federal
The Government Accountability Office government and the states and localities has
also criticized the federal aid system. In 1979 become a confused mess.”44 Reagan pushed
it found that the “problems created by our throughout his time in office to straighten out
complex intergovernmental system are enor- the mess. He managed to end revenue sharing
mous.”39 The GAO noted: in 1986, which might have grown into a mas-
sive spigot of subsidies for the states if it had
The federal assistance system is an remained in place.
array of often conflicting activities and Figures 2, 3, and 4 show that Reagan had
initiatives which defy understanding some success in cutting federal aid. Both aid

10
spending and the number of aid programs hundreds of new programs have been added
were cut substantially during the early 1980s. since then.
Data from the Office of Management and The current Bush administration has
Budget show that the number of aid pro- expanded the aid system rather than tried to
grams for the states was cut from 434 in 1980 restrain it. Department of Education outlays
to 303 in 1982 before beginning to rise have doubled since 2000 as President Bush
again.45 ACIR data show similar program has taken steps to further nationalize local
reductions under Reagan. public schools. In other areas, the Bush
A few caveats regarding the data should be administration’s faith-based and marriage
noted. OMB data on the number of aid pro- initiatives have hooked thousands of private
grams are not available before 1980, while organizations on federal subsidies. Richard
ACIR data are not available after 1995. But Nathan, an architect of Nixon’s new federal-
during the years of overlap (1980–95), the ism, opined that Bush’s policies “have reflect-
ACIR typically counted about 60 more pro- ed a willingness to run roughshod over state
grams than did the OMB. For this reason, governments that is out of character with
Figure 2 understates the growth in the num- previous Republican administrations.”46
ber of programs since the 1970s. On the
other hand, the OMB revised its methodolo- The Federal Aid Empire Today
The number of
gy for counting programs in 2004, with the The number of aid programs increased aid programs
effect of increasing the program count and from 653 in 2000 to 814 in 2006.47 Aid spend- increased from
overstating the change shown in Figure 2 ing rose from $351 billion in fiscal 2000 to an
between 2000 and 2006. estimated $449 billion in fiscal 2007, measured 653 in 2000 to
Reagan’s progress in cutting aid programs in constant 2007 dollars.48 Federal aid to the 814 in 2006.
was reversed by President George H. W. Bush. states is the third-largest item in the federal
Aid spending and the number of programs budget after Social Security ($582 billion in fis-
grew rapidly in the early 1990s. Then in the cal 2007) and national defense ($569 billion).
mid-1990s, the new Republican congressional Figure 4 shows that spending on both
majority tried again to revive federalism. Their health and nonhealth aid soared during the
biggest success was welfare reform in 1996, 1990s and then flattened out after 2003. One
which turned open-ended categorical welfare reason that spending on aid for health appears
aid into a block grant. That had the benefit of to have slowed is that billions of dollars of
making federal costs more controllable. costs for prescription drugs have been moved
The Republicans saved a modest $2 billion from Medicaid, which is a state aid program,
annually by eliminating 73 small aid programs, to Medicare, which is not a state aid program.
although that effort was offset by the estab- As aid has grown, state and local govern-
lishment of new programs. They did pass the ment budgets have become dependent on it.
Unfunded Mandates Reform Act of 1995, In the 1950s federal aid averaged 12 percent of
which modestly restrained the federal govern- state and local budgets.49 That share soared
ment’s ability to impose costly regulations on during the 1960s and 1970s, reaching a peak
the states. But the Republicans were unsuc- of 27 percent in 1978. With the retrenchment
cessful in larger federalism reform efforts, such during the Reagan years, the share fell to less
as abolishing the Department of Education than 17 percent in the late 1980s. But since
and turning Medicaid into a block grant. then the aid share of state and local budgets
Since the mid-1990s, there have been no has rebounded, rising to 22 percent by 2005.
serious efforts to reform or cut the federal aid As discussed below, those large flows of aid
system, even though it is larger and more have turned state and local governments into
costly than ever. The system’s many failings, some of Washington’s biggest lobbyists.
which were discussed often during the 1970s The five largest federal aid programs are
and 1980s, have only become more acute as Medicaid ($192 billion in fiscal 2007), highway

11
Table 1
A Sampling of Federal Aid Programs for the States
(CFDA program number, short title, and spending in 2006)

Agriculture
10.555 National School Lunch $7,457,572,000
10.574 Team Nutrition Grants 10,038,000
10.576 Seniors Farmers Markets 15,000,000
10.760 Waste Disposal for Rural Communities 456,390,000
10.855 Distance Learning and Telemedicine 54,410,012

Education
84.011 Migrant Education State Grants 376,524,000
84.027 Special Education 10,582,961,000
84.083 Women's Educational Equity Act 2,926,000
84.186 Safe and Drug-Free Schools and Communities 346,500,000
84.367 Improving Teacher Quality 2,887,439,000

Health and Human Services


93.086 Healthy Marriage and Responsible Fatherhood 150,000,000
93.235 Abstinence Education 50,000,000
93.276 Drug-Free Communities 16,621,505
93.568 Low-Income Home Energy Assistance 2,979,703,000
93.959 Prevention and Treatment of Substance Abuse 1,670,661,450

Housing and Urban Development


14.169 Housing Counseling Assistance 42,000,000
14.228 Community Development Block Grants 12,605,900,261
14.250 Rural Housing and Economic Development 16,830,000
14.850 Public and Indian Housing 3,565,223,000
14.901 Healthy Homes Demonstration Grants 4,400,000

Interior
15.022 Tribal Self-Governance 297,000,000
15.030 Indian Law Enforcement 114,620,400
15.052 Litigation Support for Indian Rights 1,431,000
15.605 Sport Fishing Restoration 290,359,836
15.626 Hunter Education and Safety 8,000,000

Justice
16.525 Violent Crimes Against Women on Campus $8,938,000
16.580 Byrne State and Local Law Enforcement Aid 189,255,557
16.595 Weed and Seed 49,361,400
16.710 Public Safety Partnership and Community Policing 472,191,152
16.727 Enforcing Underage Drinking Laws 23,220,238

Labor
17.235 Senior Community Service Employment 94,000,000
17.259 WIA Youth Activities 926,393,000
17.260 WIA Dislocated Workers 1,181,000,000
17.264 Migrant and Seasonal Farmworkers 80,000,000
17.269 Community Based Job Training 125,000,000

12
Transportation
20.106 Airport Improvement 3,423,404,000
20.205 Highway Planning and Construction 24,244,734,429
20.601 Alcohol Traffic Safety and Drunk Driving 125,000,000
20.609 Safety Belt Performance Grants 124,500,000
20.930 Payments for Small Community Air Service 10,000,000

Environmental Protection
66.032 State Indoor Radon Grants 7,438,900
66.036 Clean School Bus USA 6,270,000
66.308 Environmental Justice Research Assistance 1,000,000
66.458 Capitalization Grants for Clean Water 886,759,100
66.818 Brownfields Assessment and Cleanup 69,900,000

Other Aid Programs


23.003 Appalachian Development Highway System 470,000,000
45.313 Laura Bush 21st Century Library Program 23,760,000
81.042 Weatherization Assistance 227,000,000
97.012 Boating Safety Financial Assistance 95,000,000
97.044 Assistance to Firefighters 524,442,600

Source: Author’s compilation from the Catalog of Federal Domestic Assistance. These spending totals may dif-
fer from outlay amounts in the federal budget.

construction ($39 billion), Temporary Assist- $22 million, and it’s not hard to see where the
ance for Needy Families ($17 billion), education money goes when you examine the program’s
for the disadvantaged ($14 billion), and Section activities.54 For example, program officials at
8 housing subsidies ($15 billion).50 different levels seem to get together for fre-
Table 1 provides a sampling of aid programs quent meetings in locations such as Las Vegas,
in order to illustrate the diversity of activities Charleston, and Lake Placid.55
that the federal government subsidizes. While “fishing restoration” sounds like an
Couldn’t state and local governments or the pri- environmental activity, many of the grants in
vate sector fund those activities? Do we really this program go toward building boat launch-
need the federal government involved in school es, parking lots, piers, and other items that
lunches, farmers’ markets, hunter education, don’t do much for nature. Federal rules require
seniors’ community service, airport improve- that at least 15 percent of this program’s funds Do we really
ment, and boating safety? If First Lady Laura be spent on improving boating access to lakes need the federal
Bush wants to give $24 million to libraries, and rivers.56 One $1.2 million “fishing restora-
shouldn’t she collect the funding privately, tion” grant was for a MegaDock for luxury
government
instead of imposing on taxpayers to pay for the yachts at Charleston City Marina. An article in involved in
Laura Bush 21st Century Library Program? Boating News described how the “new extension school lunches,
Another curious program is Sport Fishing will serve to attract larger yachts. The largest
Restoration.51 In fiscal 2006 the U.S. Fish and yacht to tie up to date was 300 feet.”57 That’s farmers’ markets,
Wildlife Service program handed out to state good news for wealthy boat owners. The bad hunter education,
governments $290 million in grant money news is that “reportedly, over half of the funds seniors’ commu-
raised from various excise taxes and import are used for administration, not leaving very
duties.52 In 2000 the GAO criticized the pro- much for the proposed projects.”58 nity service,
gram’s mismanagement and “culture of per- airport improve-
missive spending,” but the agency seems to Types of Aid
have since cleaned up its act.53 In 2006 federal The 814 federal aid programs for the
ment, and
administration costs for the program were states generally take the form of either “for- boating safety?

13
Earmarking mula” or “project” grants.59 While most aid grams is the 2,437-page Catalog of Federal
occurs when the programs are project grants, most aid spend- Domestic Assistance.61 It provides an official list-
ing is on formula grants. That is because ing of all federal programs that dispense
grant process is many of the largest aid programs, including grants, loans, insurance, scholarships, and
hijacked by Medicaid, are formula grants. other types of cash and noncash benefits.62
Under formula grants, legislation spells Aid programs for the states are a subset of
individual out how much funding each state is to receive all federal subsidy programs. In 2006 the
members of on the basis of factors such as state income CFDA listed 1,696 federal subsidy programs,
Congress seeking and population. The states are often required of which 814 were for state and local govern-
to match some portion of the federal govern- ments, as noted. The number of aid programs
to divert funds to ment’s aid with their own funding. Generally, for the states has followed the same general
particular the smaller a state’s required funding share, trends over time as the total number of pro-
projects in their the more it will be induced to increase spend- grams in the CFDA. The number of programs
ing on an activity in order to maximize the was fairly flat during the 1970s, was cut in the
districts. flow of federal dollars. After they receive feder- early 1980s, and then rose rapidly during the
al aid, the states consume it themselves or pass early 1990s. Since 2000 the number of subsidy
it down to local governments on the basis of programs listed in the CFDA has soared, rising
various allocation procedures. from 1,425 in 2000 to 1,696 by 2006.63
Under project (or “discretionary”) grants,
federal agencies distribute thousands of indi- Politics Creates Complexity
vidual grants on a competitive basis after an Despite general agreement among experts
expert review of proposals. (At least that is that block grants are superior to narrow cate-
how it is supposed to work). Project grants gorical grants, only about 20 of the more than
generally require grantees to submit detailed 800 state aid programs are block grants.64 The
work plans, regular reports, and other paper- reason is that “beneficiaries of categorical pro-
work regarding their use of federal dollars. grams [have] actively opposed grant consoli-
One form of “discretionary” aid is ear- dation as a threat to their established interests,
marking. That occurs when the grant process reinforced by protective credit-claiming pro-
is hijacked by individual members of Congress gram sponsors in Congress,” noted aid expert
seeking to divert funds to particular projects Tim Conlan referring to Nixon’s block grant
in their districts. Thus, while a federal agency efforts.65 The GAO similarly concluded:
might normally distribute cancer research
grants on the basis of an expert review of pro- The categorical approach to federal
posals, politicians can end-run around the assistance has come under increasing
agency and directly target funds to health criticism in recent years. It has been char-
facilities in their districts. Note that the feder- acterized as unwieldy and, on a cost-ben-
al contracting process also gets hijacked by efit basis, unproductive . . . [however,]
congressional earmarking. our political system tends to favor cate-
Earmarking has exploded in recent years, gorical grant programs because they are
and numerous congressional scandals have easier to track and legislation addressing
stemmed from the practice. The number of a specific need holds far more political
earmarks in federal spending bills increased appeal than broader purpose block
from fewer than 2,000 per year in the mid- grant programs. Any effort to incorpo-
1990s to more than 15,000 per year recently.60 rate categorical programs into a broader
This report focuses on aid to state govern- purpose program is interpreted as an
ments, but the federal government also has attack on the congressional committees
hundreds of programs that directly provide who created the programs, the agencies
subsidies to businesses, nonprofit groups, and who administer them, and the clientele
individuals. A complete list of federal aid pro- groups who prosper.66

14
Thus, the federal aid system is not about incentives and credits were added to the tax
financing and operating programs in the most code, and it is more complex today than ever.
efficient manner; it is about politics. Categorical Thus, it seems that democratic political pres-
grants are more politically appealing because sures create increasing complexity on both the
members of Congress can use them to champi- tax and spending sides of the federal budget
on narrow causes and win interest group sup- over time.
port. Politicians, special interests, and aid recipi- To sum up, today’s federal aid structure is
ents resist conversion of programs to block massive and complex. Experts have com-
grants because that would reduce their control plained about high administrative costs, com-
and make programs easier to cut. One can plexity, and program overlaps for decades. The
debate whether or not federal aid is a good idea three layers of government in the United
in theory, but in practice the political system has States now resemble, not the tidy layer cake
locked the nation into the most complex and that existed in the 19th century, but a jumbled
inefficient form of aid: categorical aid. marble cake. Federal expansion into policy
That said, both block and categorical areas traditionally reserved to the states has
grants involve top-down control of state and proven to be a wasteful and bureaucratic way
local activities from Washington. Both types of governing the nation.
of grant lead to the creation of large bureauc- Even those who believe in aid on a theoret-
The federal aid
racies. Still, converting categorical grants to ical basis have been humbled by the inability system is not
block grants would represent progress because of governments over many decades to make about financing
it would make federal costs more controllable the system work efficiently. There are too
and aid spending easier to cut. A good first many politicians, too many different interests, and operating
step toward restraining Medicaid’s explosive and too many layers of bureaucracy for pro- programs in the
spending growth, for example, would be to grams to be designed rationally. The GAO has
convert it to a block grant. noted that the “sheer number of actors creates
most efficient
On the other hand, if reform efforts focus immense coordination problems” and that manner; it is
only on converting existing grants to block “the high costs appear inevitable” under such about politics.
grants, it might only result in short-lived vic- a large aid system.68
tories. Scholars have observed that in the Another problem is that aid programs gen-
years after block grants were established in erally work poorly, partly because Congress
the 1970s and 1980s, their relative simplicity provides nowhere near enough oversight. The
subsequently unraveled as complex regula- ACIR noted that “once a grant is designed and
tions began to creep back into programs. At operating, Congress has a key oversight role
the same time, new categorical grants were [but it] is far more interested in, and believes it
created to fill the demands of narrow interest gets much more payoff from, working on new
groups that felt shortchanged under new legislation than monitoring the results of law
block grants. The GAO reported that the already on the books.”69 The Bush administra-
Reagan block grants were changed 58 times tion has performed detailed reviews of 257 fed-
in subsequent years as Congress reinstated eral aid programs and found that 109 of them
more rules and regulations.67 are “ineffective” or could not “demonstrate
The unraveling of block grant reforms over results.”70 Yet Congress has shown little inter-
time is akin to the unraveling of major tax est in cutting or terminating those programs.
code reforms. The Tax Reform Act of 1986 A serious side effect of the aid system that
eliminated some narrow loopholes in the tax needs more attention is the “overload” that it
code while reducing overall tax rates and was has created on federal policymakers. As the sys-
hailed by proponents as a step toward a sim- tem has expanded, it has stretched thinner
pler tax code. Others note that the act added their ability to focus on crucial issues of nation-
much new complexity to the code. But all al importance such as terrorism. Members of
would agree that, after 1986, many narrow Congress spend much of their time trying to

15
secure spending for favored state and local nesses, and state and local governments. One
activities and tweaking the regulations can call education a “national” priority, but
attached to aid programs. The president of the that does not mean that the federal govern-
United States is the commander in chief of the ment has to get involved. That’s because edu-
U.S. military, but even he could be mistaken for cation is also a high priority of local govern-
the head of a local school board at times. ments and families. Local governments are free
A number of investigations have revealed to learn schooling techniques from each other,
that most members of the House and Senate but there is no compelling reason for top-
intelligence committees don’t bother, or down control from Washington.
don’t have time, to read crucial intelligence President Ronald Reagan made the fol-
reports.71 A reporter recently asked long-time lowing observation in a 1987 executive order
members of the congressional intelligence on federalism:
committees basic questions about the war in
Iraq and Islamic terrorism, and their answers It is important to recognize the distinc-
revealed severe ignorance.72 It is hard to tion between problems of national scope
quantify the extent to which the burgeoning (which may justify federal action) and
aid system has led policymakers to ignore problems that are merely common to
national problems, such as the rise in the ter- the states (which will not justify federal
rorism threat prior to 9/11, but it is a critical action because individual states, acting
concern that can be addressed by downsizing individually or together, can effectively
the federal aid system. deal with them).75

A portion of Reagan’s executive order is


Federal Aid and included in the Appendix. The confusion
Activist Politicians between problems that are truly national in
scope and those that are merely common to
There are few Over the decades, policymakers have the states even extends to homeland security.
activities that the argued that various state, local, and private When you look at the details of federal aid to
activities needed federal intervention because the states for homeland security, you find
federal govern- they had become “national priorities.” A leader that much is going toward items that would
ment performs on aid issues in the 1960s, Sen. Edmund be better funded locally, such as bulletproof
that are not also Muskie (D-ME) stated, “The national govern- vests and radio systems for first responders.
ment is best placed to have a broad view of When this sort of local spending is federal-
priorities of national interest, to identify national priorities ized, members of Congress play a game of
individuals, and to see to it that they are met . . . [thus it] tug of war over funding for their states and
distributes and administers funds in the form ignore the value taxpayers receive for their
businesses, and of categorical grant programs.”73 money. If, instead, funding and spending
state and local More recently, a fact sheet from current decisions are made together at the state or
governments. One Secretary of Education Margaret Spellings local level, cost and benefit tradeoffs will bet-
begins: “The responsibility for K-12 education ter reflect the preferences of citizens within
can call education rests with the states under the Constitution. each jurisdiction.
a “national” There is also a compelling national interest in
priority, but that the quality of the nation’s public schools. National and Local Interests
Therefore, the federal government . . . provides The idea that aid to the states can be
does not mean assistance to the states and schools in an effort designed in the “national interest” is a theory
that the federal to supplement, not supplant, state support.”74 that doesn’t match political reality. The con-
The flaw in logic here is that there are few cern of members of Congress for their states
government has activities that the federal government performs and districts almost always trumps any other
to get involved. that are not also priorities of individuals, busi- policy considerations. Members may con-

16
vince themselves that spending on aid proj- less federal Medicaid funding on a per capita Proponents of
ects in their hometowns is good for the coun- basis than other states.81 Also, a recent study aid have held
try, but that is only because the resulting tax by Education Trust came to similar conclu-
burdens are spread over the rest of the nation sions about federal aid for public schools. The that it is in the
and invisible to them. For a senator from Washington Post summarized the findings: national interest
Alaska, spending on a bridge in that state is
always more important than is the project’s A $13 billion federal program to help
to design
impact on federal taxes or the deficit. Even students from low-income families has programs that
presidents, who are elected with national actually widened an education funding support activities
mandates, often favor spending that targets gap between rich and poor states. . . .
narrow interests because the spending bene- The program, known as Title 1, is part in regions of the
ficiaries are more visible than the taxpayers of a slew of federal, state, and local country that have
who will bear the costs. policies that direct more resources to the greatest
Proponents of aid have held that it is in the the nation’s wealthiest children than
national interest to design programs that sup- to its poorest, the study concluded.82 needs. But in
port activities in regions of the country that practice, the aid
have the greatest needs. But in practice, the aid Whether or not one agrees with the idea
system has never operated in that fashion. A that the federal government ought to transfer
system has never
1940 article in Congressional Quarterly lament- resources from rich states to poor states, the operated in that
ed that “the grants-in-aid system in the United evidence shows that the federal aid system fashion.
States has developed in a haphazard fashion. does not accomplish that goal. This is impor-
Particular services have been singled out for tant because the belief that the federal govern-
subsidy at the behest of pressure groups, and ment can and should help poor regions of the
little attention has been given to national and country has underpinned support for the fed-
state interests as a whole.”76 Forty years later, eral aid system from the beginning.
the ACIR concluded essentially the same In the operation of the aid system, political
thing: and parochial concerns are far more important
than theoretical concerns about national pri-
Regarding national purpose, the record orities or helping those in need. The aid system
indicates that federal grant-in-aid pro- is a $449 billion playground on which mem-
grams have never reflected any consistent bers of Congress target subsidies to their states.
or coherent interpretation of national The problem is not that members aren’t patri-
needs. . . . Regarding fiscal equity, the record ots; it is that they are also activists and—like
indicates that federal aid programs have most people—they have emotional and com-
never consistently transferred income to munity ties to their hometowns. Indeed, mem-
the poorest jurisdictions or individuals.77 bers usually have strong ties to businesses and
nonprofit groups in their states because many
The “Robin Hood” principle, the ACIR were former state and local legislators.
observed, “has always received much more lip Of course, even before the modern grants-
service than actual use in aid distribution.”78 in-aid system, federal politicians championed
The GAO looked at that issue in 1996, exam- spending activities that benefited their home
ining whether aid was directed to the states states. Legislators with navy bases in their
that had “greater programmatic needs and states have always supported navy spending,
fewer fiscal resources.”79 It found that “feder- for example. But the expansion of the aid sys-
al aid is not targeted to offset these fiscal tem in recent decades has enormously magni-
imbalances.”80 fied the age-old regional battles in Congress.
More recently, a study by Robert Helms of Interestingly, the rise in aid in the 1960s
the American Enterprise Institute found that coincided with the rise of computers, which
those states with higher poverty rates received became a tool that politicians used to fine-

17
tune their parochial spending advocacy. By cookie jar, but the fundamental problem is
the early 1970s, budget experts were dis- that the federal cookie jar has grown so large.
cussing how Congress had descended into With 814 state aid programs and 1,696 federal
“politics by printout.”83 At the time, pro- subsidy programs overall, it is not surprising
posed legislation for aid programs would be that the number of earmarks has soared
run through mainframe computers at the because each program is a delivery vehicle for
Department of the Treasury, and printouts favors to home-state interests. The earmarking
would be delivered to Capitol Hill so that explosion was a scandal waiting to happen.
members could see whether their districts Parochial politics feeds on itself and has cre-
gained or lost from any changes.84 ated a dynamic response from the states. The
The recent explosion in the earmarking of more aid programs and more earmarking
federal aid and procurement has taken geo- there are, the more active state and local offi-
graphic political competition one step fur- cials and interest groups in Washington
ther.85 As noted, the number of earmarks in become. Highway contractors, school teachers,
federal legislation rose from fewer than 2,000 and policemen have learned that the payoff
annually in the mid-1990s to more than from the one-stop subsidy shop in Washing-
15,000 by 2005.86 Some earmarking misallo- ton is higher than the payoff from lobbying
By opening the cates resources for properly federal activities each state separately. A century ago, the agri-
floodgates to such as defense. Last year’s defense bill includ- cultural, education, and highway industries
earmarking, ed 3,000 earmarks.87 But most earmarking is were the first to discover the efficiency of lob-
for federal spending on what are properly bying for subsidies in Washington, and thou-
Congress has state, local, and private activities. sands of other local interests have since joined
encouraged a By opening the floodgates to earmarking, them in the nation’s capital.
Congress has encouraged a stampede of local The same dynamics are in play regarding
stampede of local interests to beat a path to Capitol Hill. Local federal regulations. A special interest group
interests to beat a governments and local organizations are that wants to get a law imposed in all 50 states
path to Capitol increasingly making end-runs around state can go straight to Congress and attach a regu-
officials and going straight to Congress when- lation to an aid program, rather than fight
Hill. ever they need a new parking lot, museum, or separate battles in each state. A classic example
airport terminal.88 A recent Wall Street Journal was the national drinking age law champi-
story described how lobbying by local groups oned by Mothers Against Drunk Driving. The
in Washington is undermining the ability of group had existed for just four years in 1984
state officials to make coherent plans for state when it managed to get Congress to impose a
infrastructure such as highways. A major high- drinking age of 21 on the states by tying the
way bill enacted in 2005 included 6,371 ear- regulation to a federal highway aid bill.
marks. Earmarks represent just a part of the region-
Earmarking is also tied to recent corrup- al skirmishing in Congress over federal aid. The
tion scandals. Disgraced lobbyist Jack formulas used for distributing aid are a bigger
Abramoff famously called the appropriations battleground. Consider the ongoing fights over
committees in Congress “favor factories.” the formulas used to distribute homeland secu-
Indeed, they are. Politicians trade earmarks for rity aid. Members from states with low risks of
campaign assistance, trips, sweetheart busi- terrorism, such as Sens. Ted Stevens (R-AK) and
ness deals, and general political support. Total Susan Collins (R-ME), have pushed hard to dis-
fees paid to registered lobbyists in Washington tribute grants on the basis of metrics that favor
increased from $100 million in 1975 to $2.5 their rural and less populated states but are not
billion in 2006, with a substantial share of related to risk.90 As a result of such efforts,
those fees related to earmark lobbying.89 homeland security aid has often gone to
Recent scandals have shown that federal regions that don’t need it in order to buy expen-
politicians can’t keep their hands out of the sive items that are little used.91

18
Members of Congress also battle over the MS): “Senator Lott Announces $3 mil-
formulas used for health care grants. A recent lion for Mississippi Fire Departments,”
Washington Post story profiled Sen. Hillary regarding Department of Homeland
Clinton’s (D-NY) fight to tweak the formula Security grants for 23 fire departments
that distributes federal grants for HIV/AIDs in the senator’s state.98
so that a little more flows to New York.92 By
engaging in such a fight, Clinton is signaling Note that many such press releases do not
to her constituents that she is a champion of involve earmarks; instead they tout routine
their interests. The efficiency of programs federal grant awards for which the members
and their positive or negative effects are not are simply trying to take credit. Either way, it
politically important. It is the spending that seems perverse that the nation’s top leaders
generates the favorable media coverage. in Congress focus on such obscure local con-
cerns when there are so many serious nation-
Parochial Obsessions al problems to deal with, such as the entitle-
Evidence that federal legislators are ment spending crisis.
obsessed with parochial interests, not broad Sadly, the scramble of the 535 legislators
national interests, can be found on their offi- on Capitol Hill to grab a slice of the federal
cial websites. The purpose of many, perhaps subsidy pie is an all-consuming activity.
most, congressional press releases is to tout Members and staffers insert spending projects
the securing of federal benefits for home- into appropriations bills and tweak grant for-
state activities. The following are a few recent mulas to steer aid to their regions. Every mem-
releases: ber’s Washington and home-state offices have
specialists in “grants work” and “constituent
• House Speaker Nancy Pelosi (D-CA): services” to help residents gain federal bene-
“Pelosi Announces Grant for Hybrid fits. House and Senate offices hire about as
Fuel Cell Bus,” regarding a $5 million many employees to handle constituent ser-
grant for a San Francisco bus system.93 vices and grants work as they do to handle leg-
• House Majority Leader Steny Hoyer (D- islative activities.99
MD): “Hoyer Announces Federal Funding Member websites have areas devoted to
for Hollywood Volunteer Fire Depart- helping constituents find federal funding.100
ment,” regarding a $100,000 grant to a The website of Rep. Adam Smith (D-WA)
Maryland fire department.94 offers to come to the rescue of those seeking
• House Minority Leader John Boehner (R- funding, noting that “working with the fed-
OH): “Boehner Congratulates Edison eral government to many people can be a vir-
Community College on Job Training tual maze of red tape and impossible bureau-
Grant,” regarding a $2 million grant.95 cratic regulations.”101 Congressional offices
• House Minority Whip Roy Blunt (R- help write grant proposals for constituents,
MO): “Congressman Blunt Announces they sponsor seminars on securing funding, Evidence that
Humanities Grant for Drury University and they write letters to federal agencies in
Professor,” regarding a $40,000 grant support of constituent requests.
federal legislators
for a professor to study “American The Congressional Research Service instructs are obsessed
Romanticism and the Civil War.”96 congressional offices to be proactive in finding with parochial
• Senate Majority Whip Richard Durbin out who in the state or district has applied for
(D-Ill): “Durbin, Manzullo Announce federal aid.102 Offices should contact these appli- interests, not
SBA Disaster Assistance for Rockford cants and provide support so that when the fed- broad national
Flood Victims,” regarding Small Business eral money comes through, the member of
Administration loans to homeowners Congress can claim credit. Apparently, federal
interests, can be
affected by a minor flood in Illinois.97 agencies usually contact congressional offices found on their
• Senate Minority Whip Trent Lott (R- before announcing grant awards in order to official websites.

19
Spending on aid allow members “an opportunity to notify recipi- By promoting a range of aid programs,
programs rewards ents of grants.”103 The purpose of all this, of members of Congress can pretend to be
course, is to create the mirage that grants are gifts doing something about lagging education,
the egos of from politicians, not taxpayers. highway congestion, and many other prob-
politicians. They Congressional offices create for con- lems. Capitol Hill is full of “entrepreneurs”
stituents newsletters about federal funding who gain loyal constituencies by targeting
get lauded for opportunities. The House of Representatives them with streams of aid. An ACIR analysis
their noble public publishes a weekly “Federal Funding Report” looked at the factors that caused the growth
service, get regarding aid opportunities and runs a web- in federal aid.107 They found that “entrepre-
site called “Federal Funds Express.”104 In sum, neurship” by individual politicians was the
toasted at gala members of Congress run full-service shops to main cause of the creation of new programs.
dinners, and get keep the subsidies flowing to their districts. Once programs are in place, both politicians
buildings and Most members claim to be friends of the tax- and lobbyists are quick to defend them and
payer, but in reality their main goal is to feed push for expansions.
highways named the “tax eaters,” the consumers of federal aid. Aid to the states has a number of political
in their honor. Federal aid is used as a political tool, not advantages over direct federal spending on
just by Congress, but by the executive branch an activity. One is that if it becomes clear that
as well. Leading up to the 2004 elections, the an aid program doesn’t work, federal politi-
Bush administration sent cabinet secretaries cians can blame poor state and local admin-
around the country to key states and congres- istration. Another is that federal politicians
sional districts to hand out grant funding.105 can induce more spending on an activity by
The energy secretary flew to swing states such requiring states to match federal funding
as Florida and Pennsylvania handing out $100 amounts. That allows them to claim credit
million for coal mining here and $235 million for the overall program but be responsible for
for a power plant there. Other administration only part of the resulting tax burden.
executives handed out grants for job training, Spending on aid programs rewards the
education, and community development. egos of politicians. They get lauded for their
Leading up to the 2006 elections, Bush cab- noble public service, get toasted at gala din-
inet secretaries were at it again—flying from ners, and get buildings and highways named
state to state distributing grant money to the in their honor. They enjoy being “philan-
districts of Republicans in tight races. In thropists.” Most legislators become advocates
October, Secretary of Education Margaret of programs rather than neutral referees who
Spellings flew to Pennsylvania to deliver a $6.3 judge the merits of programs against the costs
million grant and then to Ohio to deliver a $20 to taxpayers. If you look at congressional web-
million grant.106 Secretary of Labor Elaine sites, you find that many members boast of
Chao went to Pennsylvania to hand out a $10.4 the awards they have won for their support of
million grant, and Secretary of Agriculture subsidy programs.
Michael Johanns dispensed grants as well. Sen. Patty Murray’s (D-WA) website proudly
lists 81 different awards for her pro-spending
Busybodies and Philanthropists efforts.108 Awards include “Friend of the Farm
Those sorts of activities come naturally to Bureau,” the “Golden Spike Award” from Am-
most politicians, who are by nature activists trak, and the “Lifetime Leadership for Quality
and busybodies. They are in constant need of Childcare Award.” She boasts of awards for “tire-
spending activities in order to provide bullet less support of Asian Pacific elders,” “leadership
points for their speeches, fodder for their press in building communities that thrive,” “improv-
releases, and a focus for their campaigns. The ing the quality of child care,” and “support of
large array of aid programs provides a rich children and families in the nation.”
menu of items for politicians to champion in Despite what many politicians think, how-
order to signal that they are helping people. ever, championing special interest spending is

20
not a guarantee of electoral success. Former Politicians don’t just jump to the defense
senator Mike DeWine was a big spending of aid programs; they often try to cow anyone
Republican from Ohio, who called himself who proposes restraint. When new allotments
“bodyguard of the poor” while championing of aid for homeland security were awarded in
many federal aid programs. His Senate website 2006, some states did better than others com-
boasted a remarkable list of 44 “humanitari- pared to prior years. The states that did worse
an” and “public service” awards from various raised a stink and tried to reverse the alloca-
special interest groups.109 DeWine was sound- tions. Rep. Peter King (R-NY), an important
ly defeated for reelection in 2006. appropriator, said:
Like former senator DeWine, most politi-
cians are natural activists, and they believe it is As far as I’m concerned, the Depart-
always safe to play the spending game and ment of Homeland Security and the
appease as many special interests as possible. administration have declared war on
That political strategy makes it easy to raise New York. . . . It’s a knife in the back of
campaign money and generate flattering media New York, and I’m going to do every-
coverage, but it doesn’t necessarily sell with vot- thing I can to make them very sorry they
ers. An alternative strategy is to be a maverick made their decision.111
spending cutter, as is Sen. Tom Coburn (R-OK).
Most legislators
Coburn has shown that this approach can be When it comes to aid for their states, become advocates
very successful, but it is much harder work, and politicians don’t take no for an answer. If fed- of programs
most legislators don’t have a taste for making eral agencies try to be frugal with taxpayer
enemies of powerful interest groups. funds, or allocate aid with the national inter- rather than
Most members of Congress use the DeWine est in mind, politicians do their best to neutral referees
strategy, not the Coburn strategy. One reason is stomp out such behavior. Threats like King’s
that pro-spending positions usually get favor- ensure that agency bureaucrats concerned
who judge the
able and uncritical coverage in the media. In about their careers go along with the waste- merits of
2006 the Bush administration tried to trim fed- ful ways of Congress. programs against
eral grants to local police forces. That prompt- The inability to accept no was revealed after
ed members of both parties on Capitol Hill to a minor flood in 2006 that damaged 200 the costs to
jump to the defense of the grants and squash homes in wealthy Fairfax County, Virginia.112 taxpayers.
the proposal. A Washington Post story was head- The Federal Emergency Management Agency
lined “Lawmakers Criticize Budget Cuts for made the decision to deny federal flood aid to
Police.”110 The story said that the Bush propos- the county, saying that homeowners did not
al would “slash assistance” and create “deep suffer enough damage to warrant it. That
cuts” to “popular” programs for local police prompted Virginia’s senators and local House
forces. The story noted that “the International members to lobby the secretary of homeland
Association of Chiefs of Police and other police security, Michael Chertoff, to reverse the deci-
groups lobbied Congress to restore the cuts.” sion. Unfortunately, the huge flow of federal
Sometimes such stories are not overtly subsidies to the states has created a situation in
biased, but they rarely ask fundamental ques- which the attention of top officials like
tions. Nowhere in this story was the propri- Chertoff is being constantly diverted to deal
ety of those public servants lobbying for self- with trivial local matters.
serving subsidies questioned. And nowhere
was there any questioning of why the federal
government ought to be funding local police The States: America’s
at all. Subtle cues in the story suggested that Biggest Lobby
spending cuts are bad—programs that are
slated for trimming are frequently called State and local policymakers enjoy spend-
“popular” by the Washington Post. ing just as much as federal policymakers do. It

21
is an easy political decision for governors to activity and the very source of our political
cheerlead for federal aid spending in their tradition [into] . . . administrative units of the
states because taxpayers in other states are national government.”117
paying most of the costs. The Republican gov- The ACIR echoed that assessment in a
ernor of Texas, Rick Perry, is considered a con- 1993 report. Supreme Court decisions had
servative, but his official webpage is chock full eviscerated federalism to the extent that it
of press releases touting his handouts of fed- “essentially reduced the status of the states to
eral subsidies. In the space of a few weeks last that of ‘interest groups’ operating and com-
summer, the following releases appeared:113 peting in the national political process.”118
Since the explosion of federal aid in the
• “Perry: Texas Farmers and Ranchers to 1960s, state and local governments have
Share $780 Million in Drought Assist- become major lobbyists in Washington. The
ance.” new lobbying industry was called “grantsman-
• “Perry: FEMA Agrees to Reimburse Texas ship.” The ACIR reported in 1967 that “grants-
at Same Rate as Louisiana for Hurri- manship has become a popular new game in
canes.” Washington.”119 The Wall Street Journal pub-
• “Gov. Perry Announces $1.6 Million in lished a story in 1966 about the new profession
Grants to Juvenile Offender Accountabil- of “grantsman.”120 Grantsmen were the high-
ity Programs.” paid middlemen who benefited from the maze
• “Perry: Homeland Security Grants to of President Johnson’s new aid programs. The
Focus on Technology Needs.” Journal described how the areas of the country
• “Gov. Perry: Presidential Disaster Dec- that received the most aid were those with the
laration Approved for El Paso.” largest teams of grantsmen in Washington, not
• “Gov. Perry Announces $38,098 in necessarily those that were the most in need.
Victims of Crime Act Funds to El Paso Many state and local interest groups were
County.” organized, or greatly expanded their Washing-
• “Gov. Perry Announces $3.6 Million in ton offices, during the 1960s, including the
Grants to Local Law Enforcement.” National Governors Association, the Council of
State Governments, and the U.S. Conference of
The web pages of some other governors Mayors. By 1967, 13 states and 24 cities and
reveal a similar pattern of trumpeting the counties had established Washington offices to
receipt of federal subsidies. Nebraska: “Gov. lobby for aid.121 Many aid-related trade associa-
Heineman Accepts $37.7 Million from USDA tions were formed or expanded during this peri-
for Rural Development Projects.”114 Kansas: od, such as those representing education inter-
“Kansas receives $10 million for substance ests.
abuse prevention.”115 Wisconsin: “Doyle, Today there are 88,000 state and local gov-
Lawton Announce $56,000 Grant to Expand ernment entities in the United States, includ-
As federal aid Kasco Marine in Prescott.”116 ing cities, counties, towns, school districts, and
has increased, As federal aid has increased, governors special districts.122 Most receive—and many
have become less like chief executives and actively solicit—federal funding. All those gov-
governors have more like regional deputies for the federal ernmental units, and their 16 million employ-
become less like government. In their defense, the governors ees, represent a powerful lobby in support of
chief executives would say that they have no choice because aid programs and the vast federal welfare state.
Congress has stripped their powers and con- As the number of aid programs has grown,
and more like trols over just about everything. Indeed, a state and local officials have put increasing
regional deputies White House review of federalism in the efforts into federal lobbying. For example, it is
1980s argued that the federal government routine for local groups across the country to
for the federal had become “virtually omnipotent,” trans- organize “fly-ins” to Washington for personal
government. forming the states from “the hub of political arm-twisting on Capitol Hill. One recent news

22
article profiled fly-ins by officials from In California, a major performance review State
California counties.123 In early 2007, San of state government under Gov. Arnold governments
Joaquin County send 70 local officials to Schwarzenegger found that the state “does
Washington and Stanislaus County sent 17 not receive its fair share of federal grant treat federal aid
officials. Such local groups pay Washington funds.”128 The report examined the issue in like a gold mine,
lobbying firms to organize their meetings and detail and proposed that the state “develop
strategies, and each group comes equipped aggressive strategies” for “maximizing” feder-
and they use a
with a wish list of local projects that they want al aid, including creating a new office to bet- multipronged
funded. ter coordinate aid efforts.129 strategy to secure
Who can blame today’s state and local offi- Aside from such in-house grant agencies,
cials for putting so much effort into lobbying? many states have created “think tanks” to their share of aid
Aid is very competitive, and there are winners track the federal budget process and research nuggets.
and losers in federal fiscal roulette. One analy- strategies to increase federal aid. California
sis looked at the state-by-state distribution of has the California Institute for Federal Policy
$10 billion in earmarks for 2005 and found Research in Washington, D.C., which operates
that spending ranged from $985 per capita in a sophisticated tracking system for federal leg-
Alaska to just $3 per capita in Texas.124 An islation.130 That organization has a corporate
analysis of overall federal aid to the states for board stacked with California politicians,
2004 found large variations between jurisdic- business leaders, and representatives of special
tions.125 The recipients of the most aid on a interest groups. California also has the Public
per capita basis were the District of Columbia Policy Institute of California based in San
($7,445), Alaska ($4,972), and Wyoming Francisco. This organization provides fre-
($3,268), while the recipients of the smallest quent and detailed reports on California’s
amounts of aid were Nevada ($1,045), Virginia share of federal aid funding.131
($1,085), and Florida ($1,158). The Northeast-Midwest Institute represents
a group of 18 states stretching from Vermont to
Lobbying Strategies Minnesota. The institute’s website says that it
State governments treat federal aid like a publishes the “most detailed analysis of the
gold mine, and they use a multipronged flow of federal funds to the states, demonstrat-
strategy to secure their share of aid nuggets. ing the persistent federal disinvestment in
First, they work with their state delegations Northeastern and Midwestern states.”132 Inter-
in Congress to steer as much spending as estingly, this institute both lobbies for federal
possible toward home. Then they create gov- aid to its member states and receives federal aid
ernment agencies that track and manage the itself. Audits show that the institute receives
securing of federal subsidies. about $800,000 annually from 12 different fed-
Texas has an Office of State-Federal eral grant programs.133
Relations that decides priorities for the state The Northeast-Midwest Institute’s website
regarding federal aid funding, provides news boasts about its lobbying prowess. It says that
from Congress on aid programs, and works the institute helped “protect Amtrak routes in
with Texas agencies to maximize federal fund- the region,” helped “restore funding for sum-
ing.126 Maryland has a sophisticated grants mer youth programs for cities that would have
agency that was created to tackle the “increas- lost a large part of their allocation under a new
ing competition with other states” for federal formula,” “altered the food stamp program’s
aid.127 The agency seeks to increase Maryland’s criteria to take into account higher costs of liv-
“market share” of aid through activities such ing in cold climates,” “defeated persistent
as “relationship building” with federal aid attempts by southern lawmakers to change the
decisionmakers. The agency publishes a 328- match rate for Medicaid and welfare payments
page annual report that examines the state’s to the detriment of the Northeast-Midwest,”
receipt of federal aid in great detail. and “established a dual Community Develop-

23
ment Block Grant (CDBG) funding formula Loosen purse strings. Federal funding
that helps rebuild older communities.”134 does not come cheap. The region needs
The CDBG program, which funds a range to raise “start-up” money to build orga-
of local development projects, illustrates how nizational capacity (e.g. professional
technical the battles over aid can be. One grant writers), fiscal capacity (e.g. match-
item in the formula that distributes CDBG ing funds to draw down federal dollars),
funding to the states is “housing built before and infrastructure (e.g. research lab
1940.” How did this obscure item get into the space).141
CDBG formula? The Northeast-Midwest
Institute got a member of Congress to insert The report goes on to flesh out that
it into legislation in 1977 in order to tilt aid “capacity building” strategy. It says that
toward older cities.135 Wisconsin organizations should hire grant
In 2006 a fight erupted over this housing experts, travel to Washington two to four
factor in the CDBG formula. The Bush admin- times per year, and phone federal agencies
istration wanted to change it because “many weekly. They should also raise private grant
poor communities have torn down old, blight- money to hire the experts needed to “lever-
ed housing while affluent communities have age” even bigger federal grants. Here is a suc-
Federalism rehabbed theirs, giving them a leg up in the dis- cess story touted by the report:
has descended tribution of funds.”136 But any proposed
into a highly change in formulas meets resistance. One news The Private Industry Council of Mil-
story said that an official in wealthy Oak Park, waukee County received a $50,000 grant
professionalized Illinois, was “shocked” and “stunned” that her from a local private foundation to hire a
competitive city would lose some of its CDBG subsidies professional grant writer to assemble a
under the Bush proposal.137 No doubt she will competitive grant application for a job
battle between fight to block the change. training program. This relatively modest
the states—and Every state argues that it gets the short end downpayment of $50,000 aid paid off
against the of the stick from federal aid. The Northeast- with the PIC being awarded a 5-year $27
Midwest Institute found that Arizona gets an million grant from the U.S. Department
federal taxpayer. inordinate amount of aid, but an Arizona of Labor’s Employment and Training
think tank, ThinkAZ, disputed that find- Administration.142
ing.138 Meanwhile, the Public Policy Forum of
Southeastern Wisconsin argues that its region Clearly, federalism has deteriorated into a
is at a “competitive disadvantage” because of a highly professionalized competitive battle
“failure to take full advantage of federal between the states—and against the federal tax-
grants.”139 payer. Taxpayers are also losers when state and
The leaders of this Wisconsin group, local interests join hands and cooperate to lobby
including government officials and corporate together. That is the purpose of groups such as
executives, are following an aggressive strategy the National Conference of State Legislatures,
to fix the problem. In its studies on federal aid, the National Governors Association, the
the Public Policy Forum makes it sound as if Council of State Governments, the National
Wisconsin could not possibly grow without League of Cities, the National Association of
Uncle Sam’s help. A recent report, “High- Counties, and the U.S. Conference of Mayors.
Stakes Game of Risk,” says that “competitive Those groups have a major presence in
federal dollars drive economic growth . . . fed- Washington, and their efforts to increase spend-
eral funding is a diverse source of capital that ing on aid programs generate substantial news
fuels discovery and wealth creation.”140 The coverage.
report urges that local leaders build up their As an example of a recent joint lobbying
bureaucracies in order to maximize inflows of effort, those groups sent a letter to House
federal dollars: appropriators demanding a spending increase

24
for the Emergency Management Performance firm, Maximus, describes a range of grant-
Grant program. The groups “urge your strong related services it offers to its state and local
support to provide $220 million for FY 2007 for clients including “revenue maximization.”149
EMPG.”143 That funding level would represent This firm’s sales brochure boasts that it has
a 17 percent increase over the prior year’s level, “identified and secured $1.5 billion in federal
yet the groups argue that that is reasonable funding for states.”150 A search of the Internet
because there is a “shortfall” in the program. turns up dozens of other consulting and soft-
The aid advocacy industry also includes ware firms eager to help clients win federal aid
high-priced lobbyists who are hired by state such as www.freegovmoney.us.
and local governments. The number of state Perhaps the most successful prospector for
and local governments that have hired the states is Gerald Cassidy, cofounder of the
Washington lobbyists has doubled since Washington lobbying firm Cassidy and
1998.144 One lobbying firm, Alcalde & Fay, has Associates. The firm has been the focus of a
a dedicated “Municipalities Practice Group,” recent series of articles in the Washington Post.151
which generates $4 million annually in fees. Cassidy and his firm pioneered the now-com-
Such firms typically charge their state and mon practice of earmarking money for state
local government clients $10,000 to $20,000 and local spending projects in the federal budg-
per month. Alcalde & Fay boasts that it has et. Cassidy’s efforts have enabled him to amass
“secured billions of dollars in earmarked a personal fortune of $125 million.
appropriations and federal grants.”145 The Washington Post series reveals that the
As a result of one scandal in 2006, we expansion of federal spending on state and
learned that the State of Texas was paying local activities has not been driven just by
$30,000 a month to lobby Congress, with the activist politicians on Capitol Hill. Entrepre-
fees split between a Republican lobby shop neurial lobbyists, such as Cassidy, have played a
(the Federalist Group) and a Democratic key role in advancing the process by pro-active-
lobby shop (Cassidy and Associates).146 In ly selling their services to universities and other
another scandal, we learned that a top appro- local institutions across the country. These
priations lobbyist earned $1.7 million in fees days, state and local officials know that
one year and that he received a $2 million sep- Washington lobbyists are helping most other
aration agreement when he went to work for jurisdictions secure federal cash, so if they sit
then House Appropriations Committee chair- on their hands or are squeamish about paying
man Jerry Lewis (R-CA).147 Lobbying for state for lobbyists, they will lose out.
and local aid funding is big business. The time has long passed when state poli-
Note the double hit that average taxpayers cymakers would jealously guard the indepen-
endure for all this lobbying activity. As state dence of state activities and resist federal
taxpayers, individuals are the ultimate source encroachment. These days, the priority of the
of the fees paid by the states to the Washington states is to use every means available to
lobbying firms. As federal taxpayers, individu- squeeze more money from federal taxpayers. The time has
als are burdened to pay for all the extra federal State officials have complained about the
aid spending that the lobbyists secure. onerous rules of the No Child Left Behind
long passed
Because the federal budget is a gold mine Act of 2002, and 30 state legislatures passed when state policy-
for the states, it is not surprising that state and resolutions attacking NCLB for undermin- makers would
local officials invest in high-priced prospec- ing states’ rights. But the states did not call
tors. Consulting firms, specialized grants soft- for repeal of the education law, they simply jealously guard
ware, and trade publications are geared demanded more federal aid money to spend the independence
toward helping the states win federal aid. One on NCLB implementation.
consulting firm, Management Concepts,
of state activities
offers 20 different courses on aspects of feder- Trade Associations and Unions and resist federal
al grants.148 The website of another consulting Working in tandem with state and local encroachment.

25
Working in governments is a huge array of trade associa- ers, and holds conferences in Washington.
tandem with tions and unions that represent activities The group’s 2006 legislative agenda docu-
dependent on federal aid. While it is illegal to ment is entitled “WIC at RISK! A Healthy,
state and local directly use federal aid funds for lobbying, it is Strong America in Jeopardy!” The document
governments is a easy to get around that rule by forming a non- “recommends a FY 2007 funding level for
profit organization consisting of those indi- WIC of $5.388 billion” and predicts dire con-
huge array of viduals and groups that receive aid. There are sequences if policymakers don’t go along.157
trade associations thousands of such organizations that push to Another group is the National Association
and unions that increase spending on aid programs. of Housing and Redevelopment Officials.
Among the most powerful advocates for aid This group’s webpage says that “for more than
push to increase are the unions that represent state and local 60 years the National Association of Housing
spending on aid workers. The largest is the National Education and Redevelopment Officials has fought to
programs. Association, which has 3.2 million members, a secure needed housing and community devel-
staff of 555, and a budget of more than $300 opment programs.”158 NAHRO was founded
million.152 The NEA influences federal policy in 1933 and lobbied successfully to get new
through publications, meetings with legisla- federal aid programs enacted under President
tors, contributions to candidates, conferences, Franklin Roosevelt. Today it has a $5 million
and grants to other groups that favor higher budget and 40 employees in its Washington
aid spending. NEA’s website says that in 1867 office.
it “won its first major legislative victory when it NAHRO’s website says that its members
successfully lobbied Congress to establish a are those who “administer HUD programs
federal Department of Education.”153 (The fed- such as Public Housing, Section 8, CDBG
eral agency’s title was changed to the Office of and HOME.” Members include both individ-
Education in 1869.) Like many labor unions, uals and the government agencies that they
the NEA both lobbies for expanded aid and is work for. Thus, like other trade associations,
an aid recipient itself. The NEA receives federal that means that NAHRO is ultimately sup-
grants for worker training, substance abuse ported by taxpayers as it lobbies for greater
programs, and other activities.154 federal subsidies, and thus higher taxes.
Associations of state and local government NAHRO is a large and sophisticated group
agencies also promote aid spending. Consider with 43 state chapters, eight regional coun-
the National Association of State Departments cils, and 20,000 members. Its 2006 legislative
of Agriculture. This group, which is composed guide is a glossy 16-page document that rec-
of state government agriculture officials, was ommends exactly how much Congress
founded in 1915, opened a Washington office should spend on each related aid program.
in 1968, and has an annual budget of $1.9 mil- In addition to these sorts of groups, there
lion.155 The group lobbies Congress for more are hundreds, perhaps thousands, of trade
farm aid to the states through meetings on associations that represent the private-sector
Capitol Hill, letters to top federal officials, and grantees and contractors that depend on fed-
other activities. eral aid. Considering just highway construc-
Another organization of this type is the tion, there are dozens of organizations that
National WIC Association.156 WIC is a feder- lobby for increased federal aid. There are 27
al aid program started in 1974 to provide groups in the Transportation Construction
nutritional food for women, infants, and Coalition, including the American Concrete
children. The National WIC Association is an Pavement Association, the National Asphalt
umbrella group for the 2,000 state and local Paving Association, and the Portland Cement
government agencies that administer the Association.159
WIC program. This association drafts studies One member in this coalition is the
on the importance of the WIC program, American Road and Transportation Builders
advocates its positions to federal policymak- Association. It was founded in 1902 and

26
helped to pass the first major highway aid bill which means that the costs of expansion are
in 1916. It has been pushing for increased split between federal and state taxpayers.
highway spending ever since and currently Under a 50-50 arrangement, for every $2 mil-
has a Washington office with 36 employees lion spent in total on a program, the federal
and a $5 million budget.160 The organiza- government chips in $1 million. Matching
tion’s membership includes state govern- reduces the “price” to state officials of pro-
ment agencies, highway contractors, and gram expansion and prompts them to
engineering firms. ARTBA’s website states its demand more spending. If the federal match
mission clearly: is open-ended, states can expand programs
continually. Two-thirds of federal aid spend-
From its inception, ARTBA took a very ing is on grant programs that have matching
active role in lobbying for the interests of requirements.163
the transportation construction indus- That incentive for expansion has been an
try. . . . ARTBA helped pass the Federal- acute problem in Medicaid. The match for
Aid Road Act of 1916, which established Medicaid varies by state—higher-income states
the first sizeable appropriation of feder- receive a one-to-one match, while poorer states
al funds for road improvements and receive up to three dollars of federal aid for
cemented the federal government’s role each dollar of state funding.164 On average, the
The federal aid
in transportation development. Since states receive $1.30 in federal funding for every match has
1916, ARTBA has been a major force in additional dollar they spend on Medicaid provided a huge
the development of all federal trans- from their own funds.
portation policy and legislation.161 The federal aid match has provided a huge incentive for
incentive for profligacy in Medicaid. States are profligacy in
In addition to the lobbying groups that encouraged to expand benefits for lower prior-
focus on aid spending, there are hundreds of ity activities and to expand eligibility to those
Medicaid.
groups that focus on aid-related regulations. with higher incomes.165 The executive director
For example, there are many groups that lobby of the National Governors Association noted
to attach safety and environmental require- that states have expanded the program so
ments to federal highway laws. One group is the much that “approximately 60 percent on aver-
National Alliance of Highway Beautification age of any given state’s Medicaid budget is
Agencies.162 It appears to be composed of taken up by optional services and/or optional
employees of state transportation departments populations.”166 Medicaid enrollment has
whose mission is to defend the restrictions put increased 40 percent nationwide in just the
on highway billboards passed as part of a 1965 past five years.167 Federal spending on
federal highway aid bill. Medicaid has grown at an enormous annual
average rate of 10 percent since 1990, and rapid
State Spending Incentives growth is expected to continue.168
The basic incentive structure of aid pro- Another spending incentive built into
grams encourages both federal and state numerous aid programs is maintenance-of-
politicians to increase spending. Federal effort (MOE) provisions. Those rules are
politicians try to maximize the impact of aid designed to prevent states from reducing
by including provisions that prompt the their own support for activities after they
states to increase their own funding of pro- receive federal funding for them. If the feder-
grams. By inducing the states to spend more, al government provides aid for a school read-
federal policymakers can make programs ing program, it doesn’t want the states to
look more successful and win greater special reduce their own funding of reading pro-
interest support. grams. MOE rules try to ensure that states
To that end, Congress often includes maintain or increase their own funding of an
“matching” provisions in aid programs, activity. One effect is that the states have few

27
incentives to find lower-cost ways of deliver- This distortionary effect of federal aid has
ing services because MOE rules bar them been observed for decades. In 1940 a Congres-
from reducing spending. sional Quarterly article on federal aid noted:
The precise degree to which aid increases
government spending has been the subject of Evidence indicates that under the
much academic debate.169 If the states took matching system the states tend to
federal aid money and partly substituted it for spend disproportionate amounts of
their own spending, total government spend- money on these services, to the detri-
ing would rise by less than the aid amount. ment of equally important activities
That is more likely to occur with block grants, which do not receive federal aid. The
which is one reason why many federal policy- effect of federal subsidies, therefore, is
makers don’t favor block grants. But most of to give certain public services a pre-
the time, the matching and MOE provisions, ferred position in state budgets.173
the general political incentives for spending,
and the lobbying industry surrounding each In the 1980s Ed Koch, then mayor of New
program all ensure that aid expands govern- York City, complained that federal aid drew
ment at every level.170 cities into expensive commitments for social
If federal aid programs were eliminated, spending and fancy new infrastructure, while
total government spending in the United diverting city funds from core responsibili-
States would likely decline substantially. Many ties.174 And federal aid often funds infra-
states would step in and replace a portion of structure construction costs but not operat-
previous federal funding of programs with ing costs, thus creating future burdens on
their own funding. But without federal subsi- taxpayers. If a $100 million grant pays for a
dies, most states would reduce program new light rail system in a state, it would cost
spending to more reasonable levels. State federal taxpayers $100 million, but it may
responses to prior aid cuts support this view. A also cost state taxpayers years worth of oper-
detailed analysis of the federal aid cuts of the ating subsidies.
early 1980s indicated that overall spending on As the federal government has subsidized
the targeted activities fell as the states replaced more state activities over time, it has created
only a modest portion of prior aid with their an unhealthy political dynamic. Those who
own funding.171 Similarly, a statistical study of support activities that are state funded may
federal welfare, which was converted from an feel shortchanged when they compare their
open-ended matching program to a block situation with those lavished with federal
State and local grant in 1996, indicated that the reform sub- funds. As a result, they will lobby for the
governments have stantially reduced state spending compared to establishment of their own federal aid pro-
what it would have been without reform.172 grams. In this way, aid programs beget more
little incentive to To the extent that federal aid programs aid programs, and more state and local activ-
be frugal with aid draw state funds away from other unsubsi- ities are drawn in the federal aid vortex over
received from dized state activities, they put a wedge time.175
between the preferences of state residents
the federal and the choices of state policymakers. State No Incentives for Cost Control
government. As a policymakers know that if they spend $1 on a State and local governments have little
result, there has state-funded service it buys $1 of that service, incentive to be frugal with aid received from
but if they spend $1 of their own funds on an the federal government. As a result, there has
always been activity that comes with a federal match, it always been substantial waste in federal aid
substantial waste will buy $2 of that service. As a result, state programs. Even under the federal land grants
policymakers don’t provide residents with of the 19th century, the states were “prodi-
in federal aid the optimal mix of services that they really gal” with some engaging in “wildcat specula-
programs. want and are willing to pay for. tion.”176

28
In recent years, wasteful spending on aid may be lost to fraud and abuse.183 The Times The wasteful
programs has often been in the news. In 2006 story made it clear that the state has little manner in which
the inspector general of the Department of incentive to control those problems, and hires
Housing and Urban Development looked at few auditors to do so. the states treat
the Community Development Block Grant Investigations have revealed large abuses in federal aid
program and found that fraud by local gov- Medicaid’s subsidies for transportation for visits
ernments and private grantees was common to doctors. The federal government pays 70 per-
funding is
and increasing.177 cent of those costs. A recent audit found that the evident in the
There have been frequent reports of waste District of Columbia spent $16 million for these large cost
in homeland security aid programs. A 2005 services in 2005 with virtually no paper trails or
Washington Post analysis of $324 million given completed claim forms.184 During the year, overruns on
to the District of Columbia for security found 8,607 D.C. residents were reimbursed for federally funded
spending on leather jackets for police, sum- 427,898 trips, or about 50 trips each. Appar- transportation
mer jobs programs for teenagers, purchases of ently, some people are using Medicaid trans-
excess emergency vehicles, and “lucrative con- portation as a free taxi service for visiting friends, projects.
sulting contracts for political figures.”178 shopping, and other routine activities.
Similarly, a federal auditor reported that The states themselves have concocted abu-
Virginia distributed its homeland security aid sive schemes to rip off federal taxpayers
sloppily, with spending on such items as cell through Medicaid. They create mechanisms to
phones, televisions, and T-shirts.179 inappropriately boost their federal matching
In March, Reps. Anthony Weiner (D-NY) payments.185 For example, some states institut-
and Jeff Flake (R-AZ) unveiled a list of wasteful ed “taxes” on health care providers that were
projects funded with federal homeland securi- rebated back to the providers. The effect was to
ty grants.180 The list included such items as increase reported state Medicaid spending and
security cameras for a fishing village in Alaska, boost federal matching aid. States continue to
a truck for a local government employee in operate such schemes despite a decade of criti-
Indiana to drive to work, a trailer to support cism by the federal government.
lawnmower drag races in Texas, security for a The wasteful manner in which the states
bingo hall in Kentucky, and nutritional coun- treat federal aid funding is evident in the large
seling for police in Indiana. cost overruns on federally funded transporta-
The basic problem is that federal aid is tion projects.186 In 1994 Virginia officials
“free” money to state and local officials. In a claimed that the Springfield interchange proj-
story about federal relief aid after Hurricane ect would cost $241 million, but the cost
Katrina, the Washington Post quoted a former ended up being at least $676 million.187 The
top FEMA official observing that “experience cost of New York’s Penn Station redevelop-
shows that local officials spend more freely ment has more than doubled, and the project
when they expect the federal government to is years behind schedule. The GAO found that
pay the bills.”181 half of the federally funded highway projects it
The greatest waste in the federal aid system examined in recent years had cost overruns of
can be found in the largest aid program, more than 25 percent.188
Medicaid. Because the federal government The most infamous cost overrun was
pays more than half of Medicaid’s costs, the Boston’s “Big Dig” or Central Artery project.
states don’t worry too much about the pro- In 1985 officials claimed that the Big Dig
gram’s rampant fraud and abuse. A 2003 inves- would cost $2.6 billion and be completed by
tigation found that fraud in California’s 1998. The cost ultimately ballooned to $14.6
Medicaid program costs about $1 billion billion, and the project continues to have
annually.182 The New York Times reported in engineering problems. The federal share of
2005 that between 10 and 40 percent of New the cost was $8.5 billion. The state of
York State’s Medicaid budget of $45 billion Massachusetts grossly mismanaged the Big

29
Dig.189 It repeatedly bailed out bungling healthy marriage program doesn’t work? It
highway contractors and essentially reward- will be a struggle to kill it because it has
ed them for cost overruns with guaranteed hooked hundreds of lower governments and
profits. nonprofit groups on a lucrative flow of fund-
Nonetheless, the ultimate reaponsibility ing. That funding will be vigorously defend-
for wasteful spending of federal aid lies with ed by the churches, Indian tribes, communi-
Congress. Congress can cut aid programs ty groups, and ethnic organizations that are
anytime it wants. But it doesn’t because its on the healthy marriage gravy train.191
political incentives are upside down—cost
overruns on federal projects are positive ben- Federal Bureaucracies
efits to members of Congress who have aid At the top of the aid food chain, federal
activities in their states. For example, cost agencies busy themselves awarding grants,
overruns on the Big Dig meant more federal calculating grant formulas, writing regula-
money flowing to Massachusetts, which was tions, evaluating programs, and other tasks.
a political benefit to members from the state Agencies need to monitor the states to ensure
such as former House Speaker and project compliance with aid rules, and they need to
champion Tip O’Neill (D-MA). impose penalties when the rules are broken.
Members of Members of Congress have little interest Each project grant needs a panel of experts to
Congress have in the efficiency of federal spending in their review proposals and make grant awards.
little interest in states. Wasteful Medicaid spending in New Formula grants require extensive data collec-
York means more federal funding for the tion to accumulate the information needed
the efficiency of constituents of New York politicians. More for grant formulas. A GAO summary of fed-
federal spending federal aid means more government-funded eral grant formulas is 422 pages long.192
jobs for hometown voters. In sum, programs The main goal of federal agencies is to
in their states. funded with federal aid include no incentives shovel aid out the door as fast as possible. If
for cost control up or down the management they don’t, they will be hounded by politi-
chain of government. cians and interest groups. Every federal
department holds conferences and runs web-
sites to help recipients get all the aid they can.
Bureaucracies and They publish guidebooks and an endless
Regulations series of memos to help grantees sort their
way through the labyrinth of aid procedures
The desire of federal legislators to address and regulations.193
countless problems in society has led to the The Department of Agriculture’s $30 bil-
creation of the huge aid system. Policymakers lion food stamp program provides an illustra-
make it sound easy when they declare that a tion of how agencies encourage aid spending.
new aid program will help solve a problem, Apparently, only 60 percent of those eligible
but it is another thing to actually implement a for food stamps participate. One reason is
program efficiently and get positive results. that the states make applicants jump through
Consider President Bush’s $150 million aid a few hoops in order to receive benefits.194 But
program, the Healthy Marriage Initiative.190 It the USDA encourages states to lower their
would not be surprising if most of the pro- screening standards and hand out more sub-
gram’s funds are consumed by analysts, sidies. For example, it recently provided
lawyers, consultants, and other high-paid waivers to some states allowing them to sign
bureaucrats. They will create proposals, write up food stamp recipients over the telephone
studies, litigate, evaluate, and audit, and the and Internet, instead of requiring recipients
average married couple in the heartland will to appear in person at an office. The USDA
never even hear about the program. also provides bonuses to states that increase
And what if auditors find out that the their food stamp participation rates.

30
It is not known exactly how much all these This small sample of programs suggests
federal rulemaking and administrative tasks that federal administrative costs account for 5
cost federal taxpayers. Federal administra- to 10 percent or more of federal grant
tion costs for the aid system come on top of amounts. Thus, if federal administrative costs
the $449 billion cost of federal grants them- of the $449 billion aid system were 10 percent,
selves. Past estimates of aid administration that would mean an added $44.9 billion bur-
costs indicate a wide variation between pro- den on taxpayers, and put the overall costs of
grams.195 the aid system at about $500 billion.
One way to estimate administration costs However, federal costs are only a part of
is to look at agencies whose main purpose is to overall aid administration costs. Aid flows
distribute aid. Consider the Department of down to the states and then often through
Education, which has no teachers and runs no one or two layers of local government. Local
schools. Its purpose is to oversee 146 educa- governments consume some of the aid funds
tion grant programs, which are described in a on in-house bureaucracy and then often dis-
department guidebook that is 490 pages perse the rest to private contractors and
long.196 One can look at budget data for par- grantees. Funding for the largest education
ticular programs to get an estimate of federal aid program, Title I, flows to state govern-
administrative costs. For the Safe and Drug- ments, then to city and county governments,
Free Schools program, administrative costs and finally to school districts and individual
are about 8 percent of the value of grants schools. A portion of federal community
handed out.197 English Language Acquisition development aid flows to state governments,
grants have a similar 8 percent federal admin- then down to local governments, and finally
istrative cost. Another program, Safe Schools out to nonprofit groups and businesses.
Healthy Students, distributed $94 million in At each level, government agencies and pri-
grants in 2004, while paying a consultant $10 vate organizations keep a portion of funding
million to evaluate the program.198 for their administrative costs. Federal rules
Here is a sampling of the administrative sometimes specify the share of funding that
costs of other federal grant programs: may be used by recipients for administrative
costs, and 10 percent seems to be common. Most of the
• The Economic Development Administra- Considering all the administrative costs at all
tion distributed $361 million of grants in layers of government and private organiza- “bureaucracy”
2006, while incurring administration tions, it would not be surprising if much of the in American
costs of $31 million, or 9 percent of the aid budget disappeared before any actual work
grant value.199 is done. Of course, separating administration
government is at
• The Institute of Museum and Library costs from active program costs is a tricky and the state and
Services distributed $238 million of somewhat ambiguous task. If an aid program local level. State
grants in 2006, while incurring adminis- doesn’t work as planned, then the entire cost
trative costs of $12 million, or 5 percent of the program is essentially an administrative and local govern-
of the grant value.200 write-off from a taxpayer’s perspective. ments employ
• The Appalachian Regional Commission 16 million
distributed $71 million of grants in State and Local Bureaucracies
2006, while incurring administrative Most of the “bureaucracy” in American workers, far more
costs of $5 million, or 7 percent of the government is at the state and local level. State than the 1.8 mil-
grant value.201 and local governments employ 16 million
• The Justice Department’s Weed and workers, far more than the 1.8 million civilians
lion civilians
Seed anti-drug program distributed $50 employed by the federal government. Figure 5 employed by
million of grants in 2006, while incur- shows that, while the number of federal work- the federal
ring administrative costs of $11 million, ers has been roughly constant for decades, the
or 22 percent of the grant value.202 number of state and local workers has soared. government.

31
Figure 5
Number of Government Employees

7 State and Local:


Noneducation
6
Millions of Employees

5
State and Local: Education
4

3
Federal Civilian
2

1
U.S. Postal Service
0
1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Source: U.S. Bureau of Economic Analysis, National Income and Product Accounts, Table 6.5, www.bea.gov/bea/dn/nipaweb/index.

The pattern is substantially explained by the ing shown in Figures 3 and 4, suggesting that
huge growth in federal aid and the need for aid is an important cause of the growth in
state and local governments to comply with state and local bureaucracies.
masses of aid-related regulations. As aid expanded in the 1960s, huge num-
How many state and local workers owe bers of state and local workers were needed to
their jobs to federal aid and related regula- administer the new programs and to comply
tions? Given that aid represents 22 percent of with aid-related regulations. State and local
state and local budgets, a rough estimate is governments boosted staffing in order to
that 22 percent of state and local workers, or write grant proposals, implement programs,
3.5 million, owe their jobs to aid. Paul Light draft progress reports for federal agencies,
of the Brookings Institution very roughly track the federal budget, and many other
estimated that 4.7 million state and local tasks. The share of state agencies in the 50
workers handled federal aid and regula- states that receives some federal subsidies
tions.203 Either way, it appears that there are increased from 34 percent in 1964, to 63 per-
many more bureaucrats doing federally cent by 1974, and to 79 percent by 2004.204
sponsored work in state and local govern- The expansion of state bureaucracies in the
ments than in the federal government. 1960s was not an unforeseen side effect of ris-
Figure 5 shows that the trends of educa- ing federal aid; it was an intended purpose of
tion and noneducation employment in state aid—aid was “an intentionally stimulative
and local government have been similar in instrument.”205 Experts thought that state
recent decades. Employment soared during and local governments should be “modern-
the 1960s and early 1970s, slowed in the early ized,” meaning that they needed large new
1980s, and began growing again in the late bureaus of administrators. In a 1966 speech,
1980s. Note that these growth patterns are top White House official Harold Seidman
similar to the patterns of federal aid spend- lamented that state and local governments

32
were poorly suited to the “complex conditions homeless persons grants.213 Federal agencies State and local
or modern life.”206 To his way of thinking, they have lobbied California to increase agency officials can’t
had backwards structures such as biennial leg- staffing in order to meet federal requirements.
islative sessions and part-time legislators. The expansion of aid over the decades has reallocate funds
Seidman argued that the federal government led to the creation of new layers of government to improve
“should do more to support efforts to in the United States. Thousands of water
enhance the quality of state and local admin- authorities, public housing authorities, con-
government
istration.”207 The states should become better servation districts, air quality regions, and efficiency because
“partners” by hiring more staff, creating “com- other structures were created partly in the mass of
prehensive plans,” and establishing new agen- response to the expansion of federal aid.214
cies to receive federal aid. Such structures were created to receive federal federal rules and
Seidman recognized that the expansion of aid and to operate independent of city and funding sources
federal aid was creating problems. He said that county governments. The number of such spe- has balkanized
aid programs had become a “jungle” of incon- cial district government units increased from
sistency, overlap, and duplication. But his 12,000 in 1952, to 24,000 in 1972, and to their operations.
solutions were characteristic of the 1960s—the 35,000 by 2002.215 Officials have
jungle should be tamed by more experts, more The proliferation of state and local agen-
planning, and more government structures. cies and special districts has undermined the
fewer incentives
The growth in federal aid spurred the cre- ability of state and local officials to manage to pursue cost
ation of new agencies in state and local gov- government finances. Officials can’t reallocate savings because
ernments, including agencies for urban renew- funds to improve government efficiency
al, public housing, and anti-poverty efforts.208 because the mass of federal rules and funding budget needs
New agencies were needed to draft grand sources has balkanized their operations. At the can be met by
plans describing how states would spend fed- same time, officials have fewer incentives to
eral aid funds. For example, a 1968 crime bill pursue state and local cost savings these days
securing
mandated that to receive aid governors must because budget needs can be met by securing additional
create new state planning offices. additional funding from Washington. funding from
Aid programs sometimes cut across the The rise in aid has produced disjointed
jurisdictions of existing state and local agen- and uncoordinated government actions. The Washington.
cies, so new government structures had to be GAO argues, for example, that the array of 16
created. And states often needed to change separate aid programs for first responders
laws to give agencies the added powers they has created fragmented disaster response
needed to comply with aid regulations.209 One planning.216 With many state agencies being
study found that there were 51 different types supported by aid, communication channels
of agency common to state governments in have become vertical to the federal govern-
the 1950s, but today states usually have more ment rather than horizontal across state and
than 100 different types of agencies to carry local agencies. Federal aid disenfranchises
out a much broader array of activities.210 state and local elected officials because they
There continues to be federal and state are bypassed by federal funds that flow to
pressure on state agencies to beef up their aid state and local agencies.217
bureaucracies. A 2003 report by the California Federal aid funds 29 percent of state budg-
state auditor argues that state agency staffing ets, and federal and state aid together funds
should be increased in order to maximize 44 percent of local budgets.218 That means
inflows of federal aid.211 The auditor found that large parts of state and local budgets are
that agencies needed more staff to apply for beyond the direct control of the correspond-
grants and to create the planning documents ing elected officials. Aid denies state and local
needed to be eligible for aid.212 For example, leaders the ability to make tradeoffs regarding
local governments needed to create “continu- the costs and benefits of government services.
um of care plans” to be eligible for federal At the same time, aid suppresses government

33
accountability. When every level of govern- zations.”221 Thus far, the CCF has funded 44
ment is responsible for a program, experience such middleman groups.222 One is the Ohio
indicates that no level of government takes Compassion Capital Project administered by
responsibility when failures occur. the Governor’s Office of Faith-Based and
Community Initiatives in that state. Another
Private Bureaucracies is JVA Consulting LLC of Denver, which has
The federal aid system also causes bureau- received more than $2 million to hold work-
cratic growth in private organizations that shops for community organizations to help
receive funding. Federal money trickles down build their “organizational capacity.”223
through state governments, then local gov- All in all, the president’s initiative has
ernments, and finally to private businesses hooked 4,300 “faith-based and community
and nonprofit groups. These private organi- organizations” on the federal dole.224 In a
zations deal with a mass of aid-related paper- recent award of $58 million to 442 groups,
work—grant proposals, regulatory compli- taxpayer dollars were sent to such organiza-
ance, performance reporting, auditing, and tions as the Bach Viet Association, the East
other activities. Bay Spanish Speaking Citizens Association,
The federal government encourages the the Muslim American Society Boston, the
President Bush’s building of state, local, and private bureauc- Utah Federation for Youth, and United Way
initiative to racies through the funding of “capacity Silicon Valley.225 President Bush argues that
give subsidies to building.” There are entire grant programs his subsidies are building an “Army of
devoted to capacity building for environmen- Compassion,” but they are also building an
faith-based tal groups, foreign aid contractors, Indian army of lobbyists that will push for higher
organizations is tribes, and other sorts of aid recipients.219 federal aid spending.
Consider a 2005 press release from the
similarly focused Department of Housing and Urban Develop- The Burden of Federal Regulations
on building up ment: “HUD Awards Nearly $24 million for A primary activity of state and local work-
bureaucracies. Affordable Housing and Economic Develop- ers is dealing with the mass of aid-related reg-
ment.”220 Looking at the details, it is clear that ulations imposed by the federal government.
He argues that most of those HUD grants went toward hiring There are three types of aid regulations.226 The
his subsidies administrators and not actually building any first are the specific rules for each program,
are building housing. An Indian tribe in Alaska received such as the rules for disabled access that come
$150,000 to “create a management position for with transit aid. Each program may come with
an “Army of the department. Activities include reviewing hundreds or thousands of pages of rules for
Compassion,” but internal policies and procedures, and with the grantees to follow. The regulations for the $11
assistance of The McDowell Group, developing a billion Individuals with Disabilities Education
they are also strategic plan.” A Daytona Beach housing agency program are 1,700 pages long.227 The $61 mil-
building an army received $150,000 “to provide staff training, eco- lion Weed and Seed anti-drug grant program
of lobbyists that nomic development and strategic planning as has a 74-page application kit that references
well as coalition building.” 1,300 pages of regulations.228 The Byrne aid
will push for President Bush’s initiative to give subsidies program operated by the Department of
higher federal aid to faith-based organizations is similarly Justice has a 58-page application kit that refer-
focused on building up bureaucracies. A cen- ences 1,000 pages of regulations.
spending. terpiece of the initiative is the Compassion One can get a sense of how complex the
Capital Fund, which funds “intermediary rules for each aid program are by examining
organizations that provide capacity-building the websites of federal, state, and local agen-
assistance to faith-based and community cies that administer the programs. For
organizations. Intermediary organizations Community Development Block Grants, state
serve as a bridge between the federal govern- and local agencies publish many lengthy
ment and faith-based and community organi- guidebooks and planning documents, and

34
they evaluate thousands of funding proposals the federal government over particularly
by grantees. The State of Virginia’s CDBG onerous regulations, but a 1923 Supreme
manual is 170 pages long.229 The forms and Court case established that aid-related rules
guidance for CBDG grantees in Virginia are are constitutional because state participation
132 pages long.230 in aid programs is voluntary.233 More recent-
“Crosscutting requirements” are a second ly, a 1984 highway law threatened to cut aid
type of regulation that come with federal aid. to those states that did not raise their drink-
These are general provisions that apply across ing ages to 21. South Dakota challenged the
many aid programs, such as employment and regulation, but a 1987 Supreme Court deci-
labor market rules. Davis-Bacon requirements sion sided with the federal government and
that set minimum wages on federal projects approved the law—notwithstanding that the
are a good example. There are dozens of cross- 21st Amendment to the Constitution gave
cutting regulations on federal aid that grantees the states the power to regulate alcohol.234
must comply with. Aid-related rules have been found to be
“Crossover sanctions” are a third type of constitutional, but there is no doubt that
aid regulation. Under these rules, cuts to fed- they are very costly. For example, state offi-
eral aid are imposed if certain federal regula- cials have long complained about the cost of
tory requirements are not met. For example, rules tied to education aid. A former educa-
under a 1965 law the federal government tion official in Arizona noted that 45 percent
threatened to cut highway aid to those states of the state’s employees dealt with federal aid
that did not follow new guidelines on bill- programs, but that those programs account-
board advertising. The federal government ed for just 6 percent of state education
made a similar threat to those states that did spending.235 A Florida education official sim-
not impose a 55-mile-per-hour speed limit ilarly complained about
under a 1974 law. (The national speed limit
was repealed in 1995.) the crushing burden caused by too
The growth in aid-related regulations has many federal regulations, procedures,
been very good for the legal industry. Grant and mandates. Florida spends millions
law became a hot area in the 1970s as a result of dollars every year to administer
of the explosion in grant litigation.231 As is inflexible, categorical federal programs
tax law, grant law is complex partly because that divert precious dollars away from
lobbyists work to carve out narrow benefits raising student achievement . . . there
and exceptions to the rules. Also, judicial are 297 state employees to oversee and
developments in the 1970s opened the flood- administer approximately $1 billion in
gates to court activity related to aid. There federal funds. By contrast, we have 394
was an increase in third-party challenges to state-funded positions to oversee and
crosscutting aid regulations, such as those administer approximately $7 billion in
related to discrimination and environmental state funds.236
rules. There have also been many legal dis-
putes between grantees and federal agencies. Aid for special education—that is, for those
Consider, for example, that the National students with disabilities—is an area of partic-
Head Start Association, which defends the ularly large regulatory costs. Federal regula- The high costs
Head Start aid program, has its own Legal tions require that states provide an extensive
Advisory Service.232 The service exists to pro- array of special education services, and even and intrusiveness
vide legal training and legal guidance for the must provide legal support for parents who of aid-related
recipients of Head Start subsidies. think that schools aren’t doing enough for regulations have
The high costs and intrusiveness of aid- their children. The result is “a lawyers’ play-
related regulations have caused great con- ground” that overidentifies target recipients caused great
cern. The states have occasionally challenged and is subject to rapidly rising costs.237 One concern.

35
The states have expert called special education “an empire “during the 1960s and 1970s, state and local
complained about controlled by lawyers, bureaucrats, and inter- governments, for the first time, were brought
est groups.”238 The National Conference of under extensive federal regulatory con-
the high costs State Legislatures argues that federal rules for trols.”243 By one estimate the number of feder-
of “mandates” special education cost them billions of dollars al mandates on lower governments had risen
more to implement than they receive in feder- to 1,259 by 1980, of which 1,036 were aid-
imposed on al aid.239 related rules and 223 were direct orders.244
them from The states have complained bitterly about By the 1980s there were loud calls to cut
Washington. That the high costs of the No Child Left Behind Act the high costs of federal regulations and man-
of 2002. The act requires that all teachers be dates. The Reagan administration promised
phrase often “highly qualified,” that Spanish-language ver- to provide regulatory relief, and it made
means both sions of tests be administered, and that certain progress in some areas. Yet the ACIR found
aid-related children have after-school tutoring. The NCSL that there were more statutes with major man-
argues that the act’s requirements have cost dates passed during the 1980s (27) than
regulations and the states $22 billion but that the federal gov- passed during the 1970s (22) or the 1960s
other legal ernment has covered only $12 billion of those (12).245 ACIR lamented that federal courts
costs.240 Fairfax County, Virginia, claims that “became involved regularly in telling state and
requirements that the act cost it $132 million over the first five local governments what they must do, not just
impose costs years, but that the federal government gave the what they must not do,” and that states
on lower govern- county only $9 million in related aid.241 Such became “virtually powerless to challenge feder-
claims may or may not be accurate, but al action in the courts on Tenth Amendment
ments and the American taxpayers bear the costs of pro- grounds.”246 In 1993 an ACIR report found
private sector. grams and regulations whichever level of gov- that unfunded federal mandates had
ernment imposes them.
Since the 1970s, the states have complained reached such proportions as to consti-
about the high costs of “mandates” imposed tute an overextension of the constitu-
on them from Washington. That phrase often tionally delegated powers of the
means both aid-related regulations and other Congress and the Executive, an abridge-
legal requirements that impose costs on lower ment of the authority of citizens in their
governments and the private sector. Other state and local communities to govern
legal requirements include “direct orders” to their own affairs, and an impairment of
implement such things as federal labor stan- the ability of citizens to hold their elect-
dards under the threat of civil or criminal ed federal officials accountable for the
penalties and “partial preemptions,” which set public costs of their decisions. This
general standards but allow states to establish development is new and alarming. Even
their own rules to meet the standards, as under more alarming is the weight of recent
the Clean Air Act of 1970. decisions by the U.S. Supreme Court
The difference between regulations related toward the view that constitutional lim-
to aid programs and the federal government its on the federal government’s powers
simply commanding states to perform certain are nonjusticiable, even though the
actions is not always clear-cut. The NCSL Constitution is founded on the premise
notes that with respect to federal disabilities that the power of the federal govern-
aid programs, if a state refused to participate, ment should be limited by the primary
it would open itself up to lawsuits for not reach of state authority.247
complying with federal civil rights laws.242 For
this reason and others, the states usually feel Policymakers took those concerns seri-
compelled to join federal aid programs. ously, and the new Republican congressional
Both federal aid and federal mandates majority in 1995 promised once again to cut
exploded after 1960. The ACIR noted that mandates and revive federalism. Their main

36
achievement on the regulatory front was the the costs of federal involvement in state and
Unfunded Mandates Reform Act of 1995. local activities are higher than just the direct
The act requires that official estimates of the costs of aid. State and local governments
costs of mandates be available during con- spend billions of dollars annually dealing with
gressional consideration of bills, and it cre- federal aid regulations and mandates, and
ates some procedural hurdles for bills that that imposes burdens on taxpayers above and
include mandates with substantial costs. beyond the $449 billion annual costs of feder-
UMRA may have deterred some costly al grants themselves.
new rules from being imposed, but its bene- Let’s look at federal aid from the bottom
fits have been modest. For one thing, up by considering Fairfax County, Virginia. In
Congress has voted to put aside UMRA and 2005 the county received $230 million from
impose new mandates whenever it has want- 98 separate federal grant programs.251 Grants
ed to, such as for a minimum wage increase included $35 million for housing vouchers,
in 1996. Also, UMRA did not include aid- $14 million for school lunches, $1,303 for
related regulations under its definition of Citizen Corps, and $1,715 for a bulletproof
“mandate,” and thus it didn’t do anything to vest program. When one looks at that aid to
tame the high costs of the federal aid empire. Fairfax County, a number of questions come
Today, the federal government continues to mind.
State and local
to impose hundreds of mandates and aid- First, note that the larger aid programs, governments
related rules on state and local governments housing vouchers and school aid, were origi- spend billions of
every year. By one count, federal agencies typ- nally supposed to be targeted to poor areas in
ically impose more than 800 new rules and the country. But Fairfax County is one of the dollars annually
regulations on state and local governments wealthiest counties in the United States and dealing with
each year.248 The largest rule generators are could easily afford its own anti-poverty pro-
the Environmental Protection Agency and grams, if such programs were a good idea.
federal aid
the Departments of Agriculture, Interior, Second, consider the smaller aid programs. regulations and
Health and Human Services, and Homeland How many bulletproof vests can the county mandates, and
Security. Rough estimates of the total costs buy for $1,715? How many hours of police
of unfunded mandates to state and local gov- time were consumed by paperwork to receive that imposes
ernments have been up to $800 billion.249 this small amount of aid? If police officer burdens on
However, one should scrutinize all claims compensation is $30 an hour, and 20 hours taxpayers above
of mandate costs to understand what is were needed for paperwork, that would eat up
included. For example, the states often claim a third of the value of the bulletproof vest and beyond the
that if federal appropriations for a program grant. Of course, Fairfax is capable of funding $449 billion
fall short of an amount previously author- its own bulletproof vests if they are a priority
ized, it constitutes a “mandate.” The No for the local police.
annual costs of
Child Left Behind Act authorized $116 bil- Fairfax County has developed a detailed federal grants
lion of federal spending over six years, but reporting structure to document the costs of themselves.
Congress appropriated “only” $73 billion. federal regulations, including aid-related
Liberal interest groups have complained that rules and other mandates. One federal regu-
this “funding shortfall” is an “unfunded lation requires that local health services be
mandate” on the states.250 But these com- available in various non-English languages.
plaints about NCLB do not have the interests Fairfax estimates that this single regulation
of taxpayers in mind—it is taxpayers who costs county taxpayers $350,000 per year.252
fund all government programs and ultimate- As another example, the costs to manage the
ly bear the costs of all mandates. If the feder- Community Development Block Grant pro-
al government were to spend more on NCLB, gram in Fairfax were $644,000 in 2006. And
it would impose higher costs on taxpayers. administering the Section 8 housing grant
The important point to remember is that program cost the county $561,000 in 2006.

37
All in all, Fairfax estimates that it spent notes, and creates interlocking defensive layers
$422 million complying with aid-related rules that resist any cuts.255
and federal mandates in 2006, or more than This study has focused on the spending
$400 for each resident of the county.253 Those pressures and bureaucracy created by aid, but
costs have grown at about 8 percent annually there are many other problems. The top-down
during the past decade. In sum, federal regula- micromanagement that comes with aid
tory intervention in state affairs is very costly, smothers policy diversity in the states. Aid
and spending on aid as reported in the federal mutes beneficial tax competition between the
budget only captures a portion of overall fed- states. Aid destroys political accountability—
eral intrusion into state and local activities. when programs fail, politicians usually point
fingers at other levels of government. The fed-
eral aid system has been called “the triumph of
Conclusion expenditure without responsibility.”256
Another problem is the “overload” that aid
Under the federal aid system, about $500 creates on federal decisionmaking. Each new aid
billion flows into Washington each year from program has stretched thinner the ability of pol-
taxpayers in the 50 states. The funds are allo- icymakers to deal with crucial national prob-
cated by power brokers in Congress and rout- lems because they are dealing with hundreds of
ed through the federal bureaucracies. Then, local spending issues. In 1925 President Calvin
somewhat depleted, the funds are sent back Coolidge argued that aid to the states should be
to the states coupled with thousands of cut because it was “encumbering the national
pages of federal regulations to comply with. government beyond its wisdom to comprehend,
It is a roundabout funding system that serves or its ability to administer” its proper roles.257
no important economic purpose. If it was Today, when we find out that key members of
shut down, state governments and the pri- Congress don’t understand the basics of terror-
vate sector would step in and fund those ism or bother reading national intelligence
activities that they thought were worthwhile. reports, we know that Coolidge was right.
During the 1970s and 1980s, government Americans would be better off if the aid sys-
auditors, official commissions, and many ana- tem was greatly cut or eliminated and federal
lysts determined that the aid system needed policymakers focused on delivering a limited
major reforms. A 1975 GAO report was entitled range of high-quality national services such as
“Fundamental Changes Are Needed in Federal defense. With the coming federal budget
Americans Assistance to State and Local Governments.”254 crunch from rising costs in Social Security and
would be better Those fundamental changes were never made. Medicare, the aid system is an ideal place to
off if the aid Ronald Reagan put the system on a diet for a find budget savings. Initial reform steps
few years, but the core pathologies were not should include converting Medicaid to a block
system was addressed. Since then, hundreds more pro- grant to control costs and terminating hun-
greatly cut or grams have been added to the system, the costs dreds of lower-priority aid programs.
have grown higher, and the parochial battles Cutting the aid system will require heavy
eliminated and over aid are bigger than ever. political lifting because the system is deeply
federal policy- The aid system thrives, not because it makes entrenched. There are tens of thousands of
makers focused economic sense, but because it maximizes the state and local governments, unions, trade
political benefits of government spending. Aid associations, and other groups addicted to
on delivering a gets all levels of government involved in each the flows of dollars from Washington, and
limited range of spending activity, which allows each level to they will try to block any reforms. Ronald
blame the others for poor service quality and Reagan showed that aid can be cut, but actu-
high-quality high tax burdens. The system ingeniously ally cutting it will take a fundamental chal-
national services “provides interest groups with multiple oppor- lenge from another determined and reform-
such as defense. tunities and access points,” as Michael Greve minded president.

38
Appendix:
A Portion of Presidential Executive Order 12612: Federalism
October 26, 1987

By the authority vested in me as President by the Constitution and laws of the United States
of America, and in order to restore the division of governmental responsibilities between the
national government and the States that was intended by the Framers of the Constitution and
to ensure that the principles of federalism established by the Framers guide the Executive
departments and agencies in the formulation and implementation of policies, it is hereby
ordered as follows: . . .

Sec. 2. Fundamental Federalism Principles. In formulating and implementing policies that


have federalism implications, Executive departments and agencies shall be guided by the fol-
lowing fundamental federalism principles:

(a) Federalism is rooted in the knowledge that our political liberties are best assured by lim-
iting the size and scope of the national government.
(b) The people of the States created the national government when they delegated to it
those enumerated governmental powers relating to matters beyond the competence of
the individual States. All other sovereign powers, save those expressly prohibited the
States by the Constitution, are reserved to the States or to the people.
(c) The constitutional relationship among sovereign governments, State and national, is
formalized in and protected by the Tenth Amendment to the Constitution.
(d) The people of the States are free, subject only to restrictions in the Constitution itself
or in constitutionally authorized Acts of Congress, to define the moral, political, and
legal character of their lives.
(e) In most areas of governmental concern, the States uniquely possess the constitutional
authority, the resources, and the competence to discern the sentiments of the people
and to govern accordingly. In Thomas Jefferson’s words, the States are “the most com-
petent administrations for our domestic concerns and the surest bulwarks against anti-
republican tendencies.”
(f) The nature of our constitutional system encourages a healthy diversity in the public
policies adopted by the people of the several States according to their own conditions,
needs, and desires. In the search for enlightened public policy, individual States and
communities are free to experiment with a variety of approaches to public issues.
(g) Acts of the national government—whether legislative, executive, or judicial in nature—
that exceed the enumerated powers of that government under the Constitution violate
the principle of federalism established by the Framers.
(h) Policies of the national government should recognize the responsibility of—and should
encourage opportunities for—individuals, families, neighborhoods, local governments,
and private associations to achieve their personal, social, and economic objectives
through cooperative effort.
(i) In the absence of clear constitutional or statutory authority, the presumption of sovereign-
ty should rest with the individual States. Uncertainties regarding the legitimate authority of
the national government should be resolved against regulation at the national level.

Sec. 3. Federalism Policymaking Criteria. In addition to the fundamental federalism princi-

39
ples set forth in section 2, Executive departments and agencies shall adhere, to the extent per-
mitted by law, to the following criteria when formulating and implementing policies that have
federalism implications:

(a) There should be strict adherence to constitutional principles. Executive departments


and agencies should closely examine the constitutional and statutory authority sup-
porting any Federal action that would limit the policymaking discretion of the States,
and should carefully assess the necessity for such action. To the extent practicable, the
States should be consulted before any such action is implemented. Executive Order No.
12372 (“Intergovernmental Review of Federal Programs”) remains in effect for the pro-
grams and activities to which it is applicable.
(b) Federal action limiting the policymaking discretion of the States should be taken only
where constitutional authority for the action is clear and certain and the national activ-
ity is necessitated by the presence of a problem of national scope. For the purposes of
this Order:
(1) It is important to recognize the distinction between problems of national scope (which
may justify Federal action) and problems that are merely common to the States (which
will not justify Federal action because individual States, acting individually or together,
can effectively deal with them).
(2) Constitutional authority for Federal action is clear and certain only when authority for
the action may be found in a specific provision of the Constitution, there is no provi-
sion in the Constitution prohibiting Federal action, and the action does not encroach
upon authority reserved to the States.
(c) With respect to national policies administered by the States, the national government
should grant the States the maximum administrative discretion possible. Intrusive,
Federal oversight of State administration is neither necessary nor desirable.
(d) When undertaking to formulate and implement policies that have federalism implica-
tions, Executive departments and agencies shall:
(1) Encourage States to develop their own policies to achieve program objectives and to
work with appropriate officials in other States.
(2) Refrain, to the maximum extent possible, from establishing uniform, national stan-
dards for programs and, when possible, defer to the States to establish standards.
(3) When national standards are required, consult with appropriate officials and organiza-
tions representing the States in developing those standards. . . .

RONALD REAGAN
THE WHITE HOUSE
October 26, 1987.
Exec. Order No. 12612, 52 FR 41685, 1987 WL 181433 (Pres.)

40
15. Galloway.
Notes 16. Weingroff.
1. Ronald Reagan, Executive Order 12612, 17. See Galloway, chap. 16.
October 26, 1987, www.reagan.utexas.edu/archi
ves/speeches/1987/102687d.htm. 18. Quoted in Galloway.
2. Advisory Commission on Intergovernmental Re- 19. Quoted in MacDonald, p. 238.
lations (ACIR), “Federal Regulation of State and
Local Governments: The Mixed Record of the 20. Galloway.
1980s,” July 1993, p. vi. All ACIR reports are available
at www.library.unt.edu/gpo/acir/browsetitles.htm. 21. Ibid.
3. James Madison, veto message for the Bonus 22. Ibid.
Bill, March 13, 1817. Available at www.constitu
tion.org/jm/18170303_veto.htm. 23. I excluded these funds from Figure 3 because
they were temporary. See Canada, p. 6.
4. Andrew Jackson, veto message for the Maysville
Road Bill, May 27, 1830. Available at www.guten 24. This was the Commission on Intergovern-
berg.org/files/10858/10858-h/10858-h.htm. mental Relations. See Laurence J. O’Toole, “Over-
view,” in American Intergovernmental Relations, ed.
5. Ben Canada, “Federal Grants to State and Local Laurence J. O’Toole (Washington: Congressional
Governments: A Brief History,” Congressional Quarterly, 1985), p. 9.
Research Service, RL-30705, February 19, 2003, p. 2.
25. Canada, p. 7.
6. For articles on the history of federal road fund-
ing, see Federal Highway Administration, “Highway 26. ACIR, “Fiscal Balance in the American Federal
History,” www.fhwa.dot.gov/infrastructure/history. System,” vol. 1, October 1967, p. 157.
htm.
27. Howard Chernick, “Federal Grants and Social
7. G. B. Galloway, “Federal Subsidies to the States,” Welfare Spending: Do State Responses Matter?”
Congressional Quarterly, December 13, 1924. All early National Tax Journal 53, no. 1 (March 2000): 143.
CQ articles are available from CQ Researcher Online.
28. Timothy J. Conlan, “The Politics of Federal
8. General Accounting Office (GAO), “Federal Block Grants: From Nixon to Reagan,” Political
Grants: Design Improvements Could Help Federal Science Quarterly 99, no. 2 (Summer 1984): 250–51.
Resources Go Further,” GAO/AIMD-97-7, Decem-
ber 1996, p. 4. 29. Ibid., p. 250.
9. For detailed early discussions of these grant pro- 30. Ibid., p. 249.
grams, see Galloway; and Austin F. MacDonald,
Federal Aid: A Study of the American Subsidy System 31. Quoted in Canada, p. 9.
(New York: Thomas Y. Crowell, 1928). Another good
source for the history of grants is ACIR, “Categorical 32. Richard Nixon, “Annual Message to the Con-
Grants: Their Role and Design,” Report A-52, May gress on the State of the Union,” January 22,
1977. 1971. Available at www.nixonlibrary.org.

10. MacDonald, p. 94. 33. ACIR, “Characteristics of Federal Grant-in-


Aid Programs,” June 1995, p. 8.
11. B. Putney, “Federal-State Relations under
Grants-in-Aid,” Congressional Quarterly, July 30, 34. Tax Foundation, “Federal Grants: The Need for
1940. Reform,” Research Publication no. 29, 1973, p. 7.
Available at www.taxfoundation.org/news/show/18
12. Ibid. 64.html.
13. MacDonald, p. 90. See also Richard F. Weingroff, 35. ACIR, “Federal Regulation of State and Local
“For the Common Good: The 85th Anniversary of a Governments: The Mixed Record of the 1980s,” p. 17.
Historic Partnership,” Public Roads (Federal Highway
Administration) 64, no. 5 (March–April 2001). 36. ACIR, “The Intergovernmental Grant System:
An Assessment and Proposed Policies,” January
14. MacDonald, p. 30. 1978, p. 24.

41
37. Ibid., p. 4. 51. See http://federalaid.fws.gov/sfr/fasfr.html.

38. ACIR, “The Federal Role in the Federal System: 52. Dollar values in Table 1 are from the CFDA
The Dynamics of Growth,” December 1980, p. 13. and may differ from outlay amounts in the feder-
al budget.
39. GAO, “Perspectives on Intergovernmental
Policy and Fiscal Relations,” GGD-79-62, June 28, 53. GAO, “Fish and Wildlife Service: Use of Federal
1979, p. 8. Aid Programs’ Administrative Funds,” GAO/T-
RCED-00-262, July 19, 2000, p. 2. See also GAO,
40. Ibid., p. 3. “Fish and Wildlife Service: Federal Assistance
Program Is Making Progress in Addressing Previous-
41. GAO, “Federal-State-Local Relations: Trends of ly Identified Concerns,” GAO-06-731R, July 5, 2006.
the Past Decade and Emerging Issues,” GAO/HRD-
90-34, March 1990, p. 15. 54. Budget of the United States Government: Fiscal Year
2007: Appendix, p. 629.
42. ACIR, “Federal Regulation of State and Local
Governments: The Mixed Record of the 1980s,” 55. See http://federalaid.fws.gov/jtf/jtfindex.html.
pp. 11, 51.
56. See http://federalaid.fws.gov/sfr/fasfr.html.
43. John L. Palmer and Isabel V. Sawhill, “Perspec-
tives on the Reagan Experiment,” in The Reagan 57. “Charleston City Marina Aims at Big Boat
Experiment, ed. John L. Palmer and Isabel V. Sawhill Market,” Boating News, 2002, www.theboatingnews.
(Washington: Urban Institute, 1982), p. 12. com/ccmarina.html.

44. Ronald Reagan, “Budget Message of the Presi- 58. Ibid.


dent,” Budget of the United States Government: Fiscal
Year 1983 (Washington: Government Printing 59. Aside from formula and discretionary grants,
Office, February 1982), p. M22. 41 of the 814 are “direct payments for specified
use.”
45. Office of Management and Budget, Budget
Systems and Analysis Division, “The Number of 60. Chris Edwards, “Pork: A Microcosm of the Over-
Federal Grant Programs to State and Local Govern- spending Problem,” Cato Institute Tax & Budget
ments: 1980 to 2004,” unpublished, April 8, 2005. Bulletin no. 24, August 2005. The Congressional
Research Service has a somewhat different earmark
46. Richard Nathan, “There Will Always Be a New count. See data cited in Brody Mullins, “As Ear-
Federalism,” Rockefeller Institute of Government, marked Funding Swells, Some Recipients Don’t
December 14, 2005, p. 7. Want It,” Wall Street Journal, December 26, 2006, p.
A1.
47. Author’s update of data from the Office of
Management and Budget. The OMB found 770 61. See www.cfda.gov.
aid programs for state and local governments in
2004, based on their analysis of the Catalog of Federal 62. Note that the CFDA does not include federal
Domestic Assistance. I updated the data based on the procurement.
CFDA for November 2006. Because the OMB uses
some discretionary judgment in its program count, 63. See Chris Edwards, “Number of Federal Subsidy
my count might differ from theirs if they were to Programs Is Soaring,” Cato Institute Tax & Budget
update to 2006. Thanks to Cato intern Emmanuel Bulletin no. 41, October 2006. Note the CFDA list-
Caudillo for his research assistance. ed 263 programs when first published in 1965, but
since the CFDA had just been established, that edi-
48. Budget of the United States Government: Fiscal Year tion may have undercounted the number of pro-
2008: Analytical Perspectives (Washington: Govern- grams.
ment Printing Office, February 2007), p. 107. The
author converted the budget’s constant 2000 dol- 64. A 1990 Urban Institute book called support for
lars to constant 2007 dollars. block grants a “consensus,” but that consensus may
have weakened in recent years. See Michael Fix and
49. Author’s calculations based on U.S. Bureau of Daphne Kenyon, Coping with Mandates (Washing-
Economic Analysis, National Income and Prod- ton: Urban Institute Press, 1990), Introduction, p. 1.
uct Accounts, Table 3.3, www.bea.gov/bea/dn/ni
paweb/index. 65. Conlan, p. 257.

50. Budget of the United States Government: Fiscal Year 66. GAO, “Perspectives on Intergovernmental
2008: Historical Tables, Table 12.3. Policy and Fiscal Relations,” p. 24.

42
67. GAO, “Federal Assistance: Grant System 82. Amit R. Paley, “Program Widens School Fund-
Continues to Be Highly Fragmented,” GAO-03- ing Gap, Report Shows,” Washington Post, December
718T, April 29, 2003, p. 15. 21, 2006, p. A4.

68. GAO, “Perspectives on Intergovernmental 83. Rochelle L. Stanfield, “Playing Computer


Policy and Fiscal Relations,” p. 9. Politics with Local Aid Formulas,” in American
Intergovernmental Relations, p. 172.
69. ACIR, “The Intergovernmental Grant System:
An Assessment and Proposed Policies,” p. 20. 84. This was occurring as early as 1971. See “Sharing
Loaves and Fishes,” Time, February 15, 1971, www.
70. Budget of the United States Government: Fiscal Year time.com/time/magazine/article/0,9171,904703,00.
2008: Analytical Perspectives, p. 105. html.

71. The Washington Post reported in 2004 that most 85. Dan Morgan and Helen Dewar, “GOP Dishes
members on the House and Senate intelligence com- Out Pork in Growing Portions,” Washington Post,
mittees had not read crucial terrorism reports or held November 24, 2003, p. A19.
oversight hearings to rectify problems in the intelli-
gence agencies. See Dana Priest, “Congressional 86. Edwards, “Pork.”
Oversight of Intelligence Criticized,” Washington Post,
April 27, 2004, p. A1. The Senate intelligence com- 87. Mullins, p. A1.
mittee confirmed that very few senators ever bother
to view secure intelligence documents. See Victoria 88. The State of North Carolina is so tired of hav-
Toensing, “Oversee? More Like Overlook,” op-ed, ing its planning undermined by local officials
Washington Post, June 13, 2004. Also, a member the that it has hired a lobbyist to ensure that the
September 11 Commission and former House mem- state’s congressional delegation focuses on fund-
ber, Tim Roemer, has commented that members of ing state requests only. See Pat Stith, “Road
Congress who are supposed to be overseeing intelli- Planning Short-Circuited in Congress,” Raleigh
gence are usually too busy to do so because of their News-Observer, October 29, 2006.
other activities.
89. Robert G. Kaiser, “Citizen K Street,” Washington
72. Jeff Stein, “Can You Tell a Sunni from a Shiite?” Post online, March 4 to April 8, 2007, http://
op-ed, New York Times, October 17, 2006. blog.washingtonpost.com/citizen-k-street.
Broader measures of the size of the lobbying indus-
73. Sen. Edmund Muskie (D-ME), Statement on S. try put total lobbying fees in the $20 billion range.
3140, Intergovernmental Cooperation Act of 1972,
February 8, 1972. Available online at the Muskie 90. Chris Strohm, “Senate Fight Looms over Revis-
archives at Bates College, http://abacus.bates.edu/ ing Security Grant Formula,” Congress Daily, Feb-
Library/aboutladd/departments/special/ajcr. ruary 16, 2007, p. 9. See also John Mintz, “Security
Spending Initiates Disputes,” Washington Post, April
74. Margaret Spellings, “10 Facts about K-12 Edu- 13, 2005, p. A15.
cation Funding,” Department of Education, June
2005, www.ed.gov/about/overview/fed/10facts/10 91. House Select Committee on Homeland Sec-
facts.pdf. urity, “An Analysis of First Responder Grant Fund-
ing,” April 27, 2004. See also Veronique de Rugy,
75. Reagan, Executive Order 12612. “What Does Homeland Security Spending Buy?”
American Enterprise Institute, October 29, 2004.
76. Putney.
92. Jeffrey Birnbaum, “Sen. Clinton Delays AIDS
77. ACIR, “The Federal Role in the Federal System: Law’s Renewal, Citing Cut in N.Y. Funds,” Washing-
The Dynamics of Growth,” vol. 10, June 1981, p. 94. ton Post, August 23, 2006, p. A1.
Michael Greve’s writing alerted me to this statement.
93. See www.house.gov/pelosi/press/press.html,
78. Ibid., p. 48. October 16, 2006.

79. GAO, “Federal Grants: Design Improvements 94. See http://hoyer.house.gov/newsroom, Novem-
Could Help Federal Resources Go Further,” p. 2. ber 20, 2006.

80. Ibid. 95. See http://johnboehner.house.gov/News.asp,


December 11, 2006.
81. Robert B. Helms, “The Medicaid Commission
Report: A Dissent,” American Enterprise Institute, 96. See www.blunt.house.gov/News.aspx, Decem-
January 2007. ber 8, 2006.

43
97. See http://durbin.senate.gov/record.cfm?id= 116. See www.wisgov.state.wi.us/journal_media_
267315&&, January 8, 2007. detail.asp?locid=19&prid=2368.

98. See http://lott.senate.gov/index.cfm?Fuse 117. Cited in ACIR, “Federal Regulation of State


Action=PressReleases.Home, October 4, 2006. and Local Governments: The Mixed Record of the
1980s,” p. 31.
99. Amy Joyce, “Help Wanted on the Hill,” Wash-
ington Post, January 1, 2007, p. D1. I am also draw- 118. Ibid., p. vi.
ing from an internal survey of 81 Senate offices e-
mailed to the author from a Senate staffer. 119. ACIR, “Fiscal Balance in the American
Federal System,” p. 151.
100. See, for example, Sen. Hillary Clinton’s site,
http://clinton.senate.gov/services/Grants/index.cf 120. Lewis Phelps, “Grantsmanship: New Specialists
m; and Sen. Jeff Session’s site, http://sessions.senate. Help Communities,” Wall Street Journal, November
gov/grants.htm. 22, 1966.

101. See www.house.gov/adamsmith/cs/grants. 121. ACIR, “Fiscal Balance in the American


shtml. Federal System,” p. 151.

102. Merete F. Gerli, “Grants Work in a Congres- 122. Bureau of the Census, Compendium of Public
sional Office,” Congressional Research Service, 97- Employment: 2002 (Washington: Government Print-
220C, September 17, 2003, p. 15. ing Office, September 2004), p. 14.

103. Ibid. 123. Michael Doyle, “Stanislaus Officials Lobby


Congress for Funds,” ScrippsNews, March 14,
104. See www.house.gov/ffr/resources_all.shtml. 2007, www.scrippsnews.com/node/20193.

105. Michael Dobbs, “Run-Up to Vote Is Season for 124. Federal Funds Information for States, “Earmark
U.S. Largess,” Washington Post, October 28, 2004, p. Rankings FY 2003–2005,” 2005, www.ffis.org (FFIS
A23. is an information service run by the state govern-
ments).
106. Ben Feller, “Well-Timed Funding in Tight
Races,” Washington Post, October 27, 2006, p. A21. 125. Curtis Dubay, “Federal Tax Burdens and Expen-
ditures by State,” Tax Foundation, March 2006.
107. ACIR, “The Federal Role in the Federal System:
The Dynamics of Growth,” chap. 11. 126. See www.osfr.state.tx.us.

108. See the “About Patty” portion of the senator’s 127. See www.gov.state.md.us/grants.
website at http://murray.senate.gov/about/awards.
cfm. 128. Governor of the State of California, “California
Performance Review,” August 3, 2004, http://cpr.ca.
109. Author’s count in 2006. gov. See issue no. GG07 at http://cpr.ca.gov/report/
cprrpt/issrec/gg/ir/gg07.htm.
110. Dan Eggen, “Lawmakers Criticize Budget
Cuts for Police,” Washington Post, April 6, 2006, p. 129. Ibid.
A11.
130. See www.calinst.org.
111. Dan Eggen and Mary Beth Robinson, “Anti-
Terror Funding Cut in DC and New York,” Washing- 131. See www.ppic.org/main/series.asp?i=22.
ton Post, June 1, 2006, p. A1.
132. See www.nemw.org.
112. “Officials Beseech FEMA for Aid,” Virginia in
Brief, Washington Post, August 9, 2006, p. B7. 133. An audit for fiscal 2004 showed that the
institute received $837,197 in federal aid. To find
113. See www.governor.state.tx.us. All releases ap- the data, search for the institute’s record on the
peared during August 2006. Federal Audit Clearinghouse at http://harvester.
census.gov/sac.
114. See www.gov.state.ne.us/news/2006_10/23_
rural.html. 134. See “What We’ve Done” at www.nemw.org/
past.htm.
115. See www.governor.ks.gov/news/NewsRelease
/2006/nr-06-0918a.htm. 135. Standfield, p. 175.

44
136. Paul Merrion, “Proposed Shift in Urban Grants the sophistication of a modern trade association.
Creates, Winners, Losers in Il,” Crain’s Chicago
Business, May 26, 2006, www.chicagobusiness.com. 156. See www.nwica.org.

137. Ibid. 157. www.nwica.org. See the “Legislation” tab.

138. ThinkAZ, “Federal Funds: What Share Is 158. See the discussions about the group’s histo-
Fair,” eFacts, December 2005, www.thinkaz.org. ry and organization at www.nahro.org/about/in
dex.cfm.
139. Public Policy Forum, “High-Stakes Game of
Risk,” Regional Report 3, no. 3 (March 2006), www. 159. See www.artba.org/government/tcc/mem
publicpolicyforum.org. bers.htm.

140. Ibid., p. 1. 160. The group was previously called the Ameri-
can Road Builders Association.
141. Ibid., p. 2.
161. See www.artba.org/about_artba/history/
142. Ibid., p. 5. overview.htm.

143. Letter to Hal Rogers, chairman of the House 162. See www.nahba.org.
Appropriations Subcommittee on Homeland
Security, September 5, 2006, www.ncsl.org/stand 163. GAO, “Federal Grants: Design Improvements
comm/scbudg/EMPGLtrHouse06.htm. Could Help Federal Resources Go Further,” p. 16.
Note that fewer than half of grant programs have
144. Jodi Rudoren and Aron Pilhofer, “Hiring matching requirements, but these happen to
Federal Lobbyists, Towns Learn Money Talks,” include many of the largest ones.
New York Times, July 2, 2006.
164. Michael Cannon, “Medicaid’s Unseen Costs,”
145. Cited in Gail Russell Chaddock, “Psst. K Cato Institute Policy Analysis no. 548, August 18,
Street Delivers the Goods—For a Price,” Christian 2006, p. 2.
Science Monitor, August 8, 2006.
165. For a good summary of the problem, see
146. Tara Copp, “More Questions Surround Texas’ Helms.
D.C. Lobbyist,” Cox News Service, January 25,
2006. 166. Raymond C. Scheppach, National Governors
Association, Testimony before the House Govern-
147. Charles Babcock, “Lobbying Firm Made ment Reform Subcommittee on Energy Policy,
Payment to Hill Aide,” Washington Post, June 10, Natural Resources, and Regulatory Affairs, March
2006, p. A6. 24, 2001.

148. See www.managementconcepts.com. 167. “The Medicaid Explosion,” editorial, Washington


Post, June 19, 2006, p. B6.
149. See www.maximus.com.
168. Congressional Budget Office, “The Budget
150. Maximus, Maxnews, May 2003, www.max and Economic Outlook, Fiscal Years 2007 to
imus.com/corporate/downloads/pdf/MAXNews 2016,” January 2006, p. 148.
_6-16.pdf#search=’helping%20government%20
serve%20the%20people. 169. Some scholars argue that upon receipt of fed-
eral dollars for a particular program, state govern-
151. Kaiser. ments either reduce state taxes or spend the funds
on other programs. Other scholars argue that
152. Data from the NEA website at www.nea.org. there is, instead, a “flypaper” effect such that fed-
eral spending stays where it lands, causing
153. National Education Association, “NEA’s Story: increased spending on the designated program as
Answering the Call,” Part 2, February 2006, www. planned. For a review, see GAO, “Federal Grants:
nea.org/aboutnea/neastory.html. Design Improvements Could Help Federal Re-
sources Go Further.”
154. See reports for the NEA at the Federal Audit
Clearinghouse, http://harvester.census.gov/sac. 170. For a discussion, see Richard B. McKenzie,
“How Federal Aid Hikes State and Local Taxes,”
155. www2.nasda.org/NASDA. See the group’s Heritage Foundation Backgrounder no. 223,
49-page “Organizational Profile” to understand October 29, 1982.

45
171. Richard P. Nathan, Fred C. Doolittle, and 188. GAO, “Cost and Oversight of Major Highway
Associates, “The Consequences of Cuts,” in, Ameri- and Bridge Projects: Issues and Options,” GAO-03-
can Intergovernmental Relations, p. 262. 764T, May 8, 2003, p. 6.

172. Katherine Baicker, “Extensive or Intensive 189. See the Boston Globe’s “Easy Pass” series of
Generosity? The Price and Income Effects of reports by Raphael Lewis and Sean Murphy at
Federal Grants,” National Bureau of Economic www.boston.com/globe/metro/packages/bechtel.
Research, Working Paper no. 8384, July 2001.
190. See www.acf.hhs.gov/healthymarriage/index.
173. Putney. html.

174. Edward Koch, “The Mandate Millstone,” in 191. For lists of grantees, see the funding reports
American Intergovernmental Relations, p. 217. at www.acf.hhs.gov/healthymarriage.

175. For a discussion, see McKenzie, p. 10. 192. GAO, “Grant Formulas,” GAO/HRD-87-28,
March 1987. No doubt such a report would be
176. Putney. much longer today.

177. “Fraud Grows in Urban Grant Program,” 193. For example, see this page for grantees of the
Washington in Brief, Washington Post, June 30, 2006, National Institutes of Health: http://grants2.nih.
p. A5. gov/grants/policy/policy.htm. The NIH’s basic
policy guidebook is 295 pages long.
178. Spencer Hsu and Sarah Cohen, “Most Area
Terrorism Funding Not Spent,” Washington Post, 194. Christine Vestal, “States Expand Food
April 10, 2005, p. A1. Stamp Programs,” www.stateline.org, December
6, 2006.
179. Tim Craig, “Report Says Va. Localities Misused
U.S. Security Funds,” Washington Post, July 29, 2006, 195. GAO, “The Federal Government Should but
p. B1. Doesn’t Know the Cost of Administering Its
Assistance Programs,” GGD-77-87, February 14,
180. Offices of Reps. Anthony Weiner (D-NY) and 1978. The study found that federal, state, and
Jeff Flake (R-AZ), “Security or Pork: A Review of local administrative costs (excluding private
National Homeland Security Funding Boondog- grantee costs) ranged from 0.3 percent to 28.5
gles,” March 1, 2007. percent of total program costs. This study notes
that a government report in 1955 found a range
181. Spencer S. Hsu, “First the Flood, Now the of 0.1 percent to 40 percent for a sample of 22
Fight,” Washington Post, August 30, 2006, p. A1. programs.
182. GAO, “Opportunities for Oversight and Im- 196. U.S. Department of Education, “Guide to
proved Use of Taxpayer Funds: Examples from U.S. Department of Education Programs,” 2006,
Selected GAO Work,” GAO-03-1006, August 2003, www.ed.gov/programs/gtep/gtep.pdf.
p. 152.
197. Budget of the United States Government: Fiscal
183. Clifford J. Levy and Michael Luo, “New York Year 2008. Figure derived by comparing the pro-
Medicaid Fraud May Reach into Billions,” New gram’s total outlay for FY2007 to the program’s
York Times, July 18, 2005, p. A1. state grant outlay amount.
184. Yolanda Woodlee, “Audit Faults Tracking of 198. U.S. Department of Education, “Guide to
Medicaid Spending,” Washington Post, October 10, U.S. Department of Education Programs,” 2006,
2006, p. B4. p. 335.
185. GAO, “Medicaid: HCFA Reversed Its Position 199. Budget of the United States Government: Fiscal
and Approved Additional State Financing Schemes,” Year 2007: Appendix, pp. 208, 209.
GAO-02-147, October 10, 2001, p. 1.
200. Ibid., p. 1187.
186. For further discussion, see Chris Edwards,
Downsizing the Federal Government (Washington: 201. Ibid., p. 1111.
Cato Institute, 2005).
202. Ibid., p. 710.
187. Michael Shear, “Springfield Interchange
Project Is Defended,” Washington Post, November 203. Paul C. Light, “The New True Size of Govern-
26, 2002, p. B1. ment,” New York University, Graduate School of

46
Public Service, August 2006. See also Paul C. Light, gov/news/release.cfm?content=pr05-116.cfm.
The True Size of Government (Washington: Brookings
Institution Press, 1999). 221. See www.acf.hhs.gov/programs/ccf.

204. Data cited in Chung-Lae Cho and Deil S. 222. See the list of grantees at www.acf.dhhs.gov/
Wright, “Perceptions of Federal Aid Impacts on State programs/ccf/existing_grantees/io_grantees.html.
Agencies: Patterns, Trends, and Variations across the
20th Century,” Publius: The Journal of Federalism 37, no. 223. JVA Consulting audit records available from
1 (November 2006): 111. the Federal Audit Clearinghouse at http://har
vester.census.gov/sac.
205. Ibid., p. 115.
224. U.S. Department of Health and Human
206. Harold Seidman, assistant director of the Services, news release, October 10, 2006, www.h
Bureau of the Budget, Speech included in a state- hs.gov/news/press/2006pres/20061006.html.
ment by Sen. Edmund Muskie, September 19,
1966, available at the Muskie archives at Bates 225. Ibid.
College, http://abacus.bates.edu/Library/about
ladd/departments/special/ajcr. 226. For a discussion, see Michael Fix and Daphne
Kenyon, “Introduction,” in Michael Fix and Daphne
207. Ibid. Kenyon, eds., Coping with Mandates (Washington:
Urban Institute Press, 1990), p. 3.
208. Martha Derthick, “Ways of Achieving Federal
Objectives,” in American Intergovernmental Relations, 227. See the National Education Association dis-
p. 125. cussions at www.nea.org/specialed/finalregs1.
html.
209. For a discussion about how federal aid
induced an expansion of state and local bureau- 228. White House, “Barriers to Community-
cracies, see ACIR, “Fiscal Balance in the American Based Organizations and Other Small and New-
Federal System,” pp. 163–80. comer Organizations,” news release, August 2001,
www.whitehouse.gov/news/releases/2001/08/un
210. Data cited in Cho and Wright, p. 104. levelfield5.html.

211. California state auditor, “Federal Funds,” 229. See www.dhcd.virginia.gov/CD/CDBG/docs


report no. 2002-123.2, August 2003, p. 33. /2006Manual.pdf.

212. Ibid. 230. See www.dhcd.virginia.gov/CD/CDBG/docs


/2006_CompetitiveGrant_RFP.pdf.
213. Ibid., p. 26.
231. George D. Brown, “The Courts and Grant
214. ACIR, “Fiscal Balance in the American Reform: A Time for Action,” in American Intergov-
Federal System,” pp. 164, 165, 258. ernmental Relations, p. 111.

215. Bureau of the Census, Statistical Abstract of the 232. See www.nhsa.org/training/advisory/index.
United States (Washington: Government Printing htm.
Office, 2006), Table 415, www.census.gov/com
pendia/statab. 233. Massachusetts v. Mellon, 262 U.S. 447 (1923).

216. GAO, “Federal Assistance: Grant System 234. South Dakota v. Dole, 483 U.S. 203 (1987).
Continues to Be Highly Fragmented,” pp. 13, 14.
235. Quoted in Diane Ravitch, “The National
217. GAO, “Perspectives on Intergovernmental Agenda in Elementary and Secondary Education,”
Policy and Fiscal Relations,” p. 3. in Setting National Priorities, ed. Henry Aaron and
Robert Reischauer (Washington: Brookings Insti-
218. U.S. Bureau of Economic Analysis, National tution Press, 1999), p. 284. The same complaint was
Income and Product Accounts, Tables 3.3, 3.20, made by a Wisconsin official in the early 1970s—that
and 3.21, www.bea.gov/bea/dn/nipaweb/index. half of state education workers dealt with federal aid
even though aid represented only 6 percent of the
219. Search for “capacity building” in the CFDA, state’s education budget. See Tax Foundation.
www.cfda.gov.
236. Quoted in Ravitch, p. 283.
220. Department of Housing and Urban Develop-
ment, news release, September 6, 2005, www.hud. 237. Ibid., p. 285.

47
238. Ibid., p. 284. House Committee on Government Reform, Hear-
ing of the House Committee on Government
239. National Conference of State Legislatures, Reform, March 8, 2005. Davis was discussing the
“Mandate Monitor,” March 31, 2004. results of a survey by the National Association of
Counties.
240. Ibid., p. 5.
250. See Brian Friel, “Public Education—Stay the
241. Gerry Connolly, Chairman of the Fairfax Course?” National Journal, October 7, 2006. See
County Board of Supervisors, Testimony before also Iris Lav and Andrew Brecher, “Passing Down
the House Committee on Government Reform, the Deficit: Federal Policies Contribute to the
March 8, 2005. Severity of the State Fiscal Crisis,” Center for
Budget and Policy Priorities, August 18, 2004.
242. John Hurson, National Conference of State
Legislatures, Testimony before the House Commit- 251. See the audit report for the county in the
tee on Reform, March 8, 2005. Federal Audit Clearinghouse at http://harvester.
census.gov/sac.
243. ACIR, “Federal Regulation of State and Local
Governments: The Mixed Record of the 1980s,” p. v. 252. Fairfax County, “Fiscal Year 2006 Federal/
State Mandate Report,” February 2006, www.fair
244. ACIR, “Regulatory Federalism: Policy, Process, faxcounty.gov/dmb/mandates.htm.
Impact and Reform,” February 1984, p. 157.
253. See the county’s mandates webpage at www.
245. ACIR, “Federal Regulation of State and Local fairfaxcounty.gov/dmb/mandates.htm.
Governments: The Mixed Record of the 1980s,”
pp. iii, 2, 8. Prior to 1960, ACIR only counts the 254. GAO, “Fundamental Changes Are Needed in
1931 Davis-Bacon Act and the 1940 Hatch Act as Federal Assistance to State and Local Govern-
mandates. ments,” GGD-75-75, August 19, 1975.
246. Ibid., pp. iii, 3. The ACIR’s comments were 255. Michael Greve, “Big Government Federalism,”
particularly in response to Garcia v. San Antonio American Enterprise Institute, March 1, 2001.
Metropolitan Transit Authority, 469 U.S. 528 (1985).
256. Phillip Monypenny, “Federal Grants-in-Aid
247. Ibid., p. 4. to State Governments: A Political Analysis,” in
American Intergovernmental Relations, p. 152.
248. Clyde Wayne Crews Jr., “Ten Thousand Com-
mandments,” Competitive Enterprise Institute, 2006, 257. Quoted in Charles Warren, Congress as Santa
p. 37. Claus or National Donations and the General Welfare
Clause of the Constitution (1932; New York: Arno
249. See comments of Tom Davis, chairman of the Press, 1978), p. 103.