Trying Times Ahead for Federal, State Government Relations

Federal and state government relations are complicated, and tougher times may be ahead for state legislators as funding for services remains scarce. 

“One of the hottest topics in state capitals from coast to coast is the subject of federalism, ranging from fears about debilitating cutbacks from already committed federal dollars to questions about how to respond to a broad use of federal branch executive authority,” said Peter Harkness, founder and publisher emeritus of Governing magazine.

Three experts discussed the duties, powers and limitations of state governments during a recent CSG eCademy webcast, “How Does the Power Flow in Legislative Branch Federalism?” The webcast—moderated by Harkness—was the second in a series of three civics education webinars about the state of federalism.  

Across the country, state and local governments are largely left on their own to finance public services, said Peter Posner, director of the Graduate Public Administration Program at George Mason University. At the same time, interdependence among all levels of government has grown over the past 50 to 60 years. 

“There’s very little that Washington does that doesn’t involve the states because we made a collective decision to do more national programs but not to hire legions of federal bureaucrats, but to rely on states and local partners to get the job done—a wise decision in some sense but also one that leads to a lot of tension,” he said.  

Grants have become the single most important source of revenue for states and local governments in recent years, Posner said. But transportation significant portion of federal funds are not going to states for programs. Rather, 73 percent of grants in 2014 were used to pay individuals, largely for Medicaid, Posner said. He said states also have had to contend with more federal mandates, which often are not funded sufficiently, and preemptions.   

An aging population and the increased cost of health care have presented a major problem for state and federal governments because the country lacks an adequate labor force to pay for the health care and social security needs of baby boomers. 

Alice Rivlin, senior fellow at the Brookings Institution, said states have a lot of flexibility under the Affordable Care Act, and even more flexibility is on its way. 
“This is a 50-state experiment,” Rivlin said. “It will evolve over time, and there is huge potential for the states to develop their own version of what expanding coverage means.”

Bill Hoagland, senior vice president of the Bipartisan Policy Center, presented details about reduced spending in Congress for non-defense programs. Several factors, including the statutory debt limit, will continue to make it tough to get funding for important services in states, he said. 

“We have the perfect storm, once again, brewing out there for this fall in terms of funding for these particular programs that you’re interested in at the state and local level,” Hoagland said.