Conditional Federal Spending and States' Rights

• Author: Lynn A. Baker
• Published date: 01 March 2001
• Date: 01 March 2001
• DOI: http://doi.org/10.1177/000271620157400108
• Subject Matter: Articles

Conditional Federal Spending
and States’ Rights
By LYNN
A. BAKER
ABSTRACT: With its 1995 decision in United States v. Lopez, the
Rehnquist Court made clear that the commerce clause does not grant
Congress a plenary police power. Prevailing spending clause doctrine,
however, permits Congress to use conditional offers of federal funds
in order to circumvent seemingly any restrictions the Constitution
might be found to impose on its authority to regulate the states di-
rectly. This article first explores three normative arguments in favor
of the Court’s abandoning the existing test, set forth in South Dakota
v. Dole, in favor of one that would better safeguard state autonomy
while simultaneously preserving for Congress a power to spend that
is greater than its power directly to regulate the states. It then pro-
poses a new
test under which the courts would presume invalid that
subset of conditional offers of federal funds to the states that, if ac-
cepted, would regulate them in ways that Congress could not directly
mandate. The presumption would be rebutted, and the offer of funds
permitted, by a determination that the offer of funds constitutes "re-
imbursement" spending rather than "regulatory" spending.
Lynn Baker is the Thomas Watt Gregory Professor at the University of Texas School
of Law.
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105
A MIDST all the attention af- Constitution might be held to impose
forded the Supreme Court’s re-
on Congress’s ability to regulate the
cent federalism decisions, one impor-
states. The Dole Court reaffirmed
tant fact has gone largely unnoticed:
both that &dquo;objectives not thought to
the greatest threat to state auton-
be within Article I’s ’enumerated leg-
omy
is, and has long been, Congress’s
islative fields’ ... may nevertheless
spending power. No matter how nar-
be attained through the use of the
rowly the Court might read Con-
spending power and the conditional
gress’s powers under the commerce
grant of federal funds&dquo;’ and that the
clause and Section 5 of the Four-
&dquo;Tenth Amendment limitation on
teenth Amendment, and no matter
congressional regulation of state
how absolute a prohibition the Court
affairs [does] not concomitantly limit
might impose on Congress’s &dquo;com-
the range of conditions legitimately
mandeering&dquo; of state and local offi-
placed on federal grants.’ The Court
cials, the states will be at the mercy
cautioned that &dquo;the spending power
of Congress so long as Congress is
is of course not unlimited ... but is
free to make conditional offers of
instead subject to several general
funds to the states that, if accepted,
restrictions articulated in our
regulate the states in ways that Con-
cases.&dquo;’ Unfortunately, none of the
gress could not directly mandated
1
stated restrictions was portrayed as
having much bite.
The most
THE CASE LAW
promising constraints
on conditional federal spending
On several occasions beginning in
noted by the Dole Court were a &dquo;ger-
1923, the Court has explicitly stated
maneness&dquo; requirement and a &dquo;coer-
that
cion&dquo; threshold. With
a conditional offer of federal
regard to &dquo;ger-
funds to the states is constitutionally
maneness,&dquo; the Court observed that
unproblematic because it &dquo;imposes
&dquo;conditions on federal grants might
be
no obligation but simply extends an
illegitimate if they are unrelated
option which the State is free to
’to the federal interest in particular
accept or reject.&dquo;’ Because a state has
national projects or programs,&dquo;’ but
&dquo;the ’simple expedient’ of not yielding
added that this restriction was
to what she urges is federal coer-
merely &dquo;suggested (without signifi-
cion,&dquo;’ the Court has concluded that
cant elaboration)&dquo; by prior cases.’
&dquo;the powers of the State are not
With regard to &dquo;coercion,&dquo; the Court
invaded&dquo;&dquo; and there is no Tenth
opined that &dquo;in some circumstances
Amendment
violation.
the financial inducement offered by
In its 1987 decision in South
Congress might be so coercive as to
Dakota v. Dole, the Court made clear
pass the point at which ’pressure
&dquo;9
that conditional federal spending
turns into compulsion.’ The Court
affords Congress a seemingly easy
concluded that a threatened loss to
end run around any restrictions the
states of 5 percent of their otherwise

---

106
obtainable allotment of federal high-
TOWARD
A
NORMATIVE
THEORY
OF CONDITIONAL
way funds, for example, did not pass
FEDERAL SPENDING
this critical point, but the Court did
not suggest what percentage of these
There are at least three good rea-
(or any other) funds might.&dquo;
sons for the Court to abandon the
For those who
lament the fact that
Dole test in favor of one that would
any constitutional limits on Con-
better safeguard state autonomy by,
gress’s regulatory powers can appar-
for example, presuming invalid those
ently be circumvented through com-
offers of federal funds to the states
bined use of the taxing and spending
that, if accepted, would regulate
powers, Dole leaves three important
them
in ways that Congress could not
issues unresolved. First, although
directly mandate. First, the federal
the Dole Court suggested that the
government has a monopoly power
spending clause did not authorize
over the various sources of
state rev-
Congress either to coerce the states
enue, which renders any offer of fed-
undulyll or to impose conditions
eral funds to the states presump-
&dquo;unrelated ’to the federal interest in
tively coercive. Second, many con-
particular national projects or pro-
ditional offers of federal funds will
,,12
grams,’ it provided neither a work-
actually pose a choice only to a small
able definition of these critical &dquo;coer-
subset of states, and this minority
cion&dquo; and &dquo;germaneness&dquo; standards
cannot effectively protect themselves
nor any actual or hypothetical exam-
against the majority of states
ple of their violation.
through the political process. Third,
Second, the Dole Court attempted
federal regulatory spending is espe-
no answer to the central normative
cially likely to reduce aggregate
question raised by its suggestion that
social welfare by reducing the diver-
there are limits on Congress’s power
sity among the states in the package
to offer the states conditional funds:
of taxes and services, including state
why should Congress not be able to
constitutional rights and other laws,
attach any conditions it chooses to
that each offers to its residents and
the federal funds it offers the states?
potential residents.
As the Court itself has repeatedly
observed, a state is always free to
Sources of state revenue
decline an offer of federal funds that
it finds unattractive. 13 Why, then, is
A
conditional offer of federal funds
additional, judicial protection
to the states implicitly divides them
needed to ensure the states’ auton-
into two groups: (1) states that
omy ? Third, to the extent that Dole
already comply, or without financial
would relegate control over condi-
inducement would happily comply,
tional federal spending to the federal
with the funding condition(s) and for
political process, one might question
which the offer of federal money
the ability of the states to protect
therefore poses no real choice; and (2)
themselves from Congress within
states that find the funding condi-
that process.
tion(s) unattractive and therefore

---

107
face the choice of forgoing the federal
dents have paid into the federal fisc.
funds in order to avoid complying
In these cases, the state (through its
with the condition(s) or submitting to
residents) contributes a proportional
undesirable federal regulation in
share of federal revenue only to
order to receive the offered funds.
receive less than a proportional
When the federal government
share of federal spending. Thus,
makes a conditional offer of funds,
when the federal government offers
states in the second group are
the states money, it can be under-
severely constrained in their deci-
stood simply as offering to return the
sion making by the lack of equiva-
states’ money to them, often with
lent, alternative sources of revenue.
unattractive conditions attached.
There is no competitor to the federal
government to which these states
Protections of the
might turn for substitute financial
political process
assistance. And, although each state
One
has the
might be less concerned about
power to raise funds by tax-
the level of judicial
ing income, purchases, and property
scrutiny accorded
conditional offers of federal funds to
within its borders, this power, too, is
the states if one were confident that
subject to federal control, albeit indi-
the states could
rectly. Since the adoption in 1913 of
protect themselves
the Sixteenth
through the
Amendment, which
political process. Profes-
sor Herbert
Wechsler has observed in
granted Congress the power to tax
this context that the
income &dquo;from whatever
Senate, in which
source
all states are equally
derived, [and] without apportion-
represented,
&dquo;cannot fail to function as the guard-
ment among the several States,&dquo; the
ian of state interests as such&dquo; and
states implicitly have been able to
that &dquo;federalist considerations ...
tax only the income and property
play an important part even in the
remaining to their residents and
selection of the President&dquo; (Wechsler
property owners after the federal
1954, 548, 557). He has therefore
government has taken its yearly
...