Dissecting the state: the use of federal law to free state and local officials from state legislatures' control.

AuthorHills, Roderick M., Jr.

In discussions about American federalism, it is common to speak of a "state government" as if it were a black box, an individual speaking with a single voice.(1) State governments are, of course, no such thing. Rather, a "state" actually incorporates a bundle of different subdivisions, branches, and agencies controlled by politicians who often compete with each other for electoral success and governmental power. In particular, these institutions compete with each other for the power to control federal funds and implement federal programs.(2)

This article explores one aspect of this intrastate competition -- the extent to which federal law can delegate federal powers to specific state or local institutions even against the will of the state legislature.(3) Must the federal government take state institutions as it finds them, or can it expand these institutions' powers even in the teeth of state laws that seem to bar the institutions from exercising such federally derived powers?

Such an issue can arise in two contexts. First, Congress or a federal agency might simply delegate powers to some nonfederal governmental institution created by state law -- say, a city -- while state law might prohibit the nonfederal institution from exercising such powers. For instance, the City of Tacoma and the State of Washington became entangled in a lengthy power struggle during the 1950s when the Federal Power Commission licensed the city to build a dam on the Cowlitz River, a tributary of the Columbia River. The State of Washington sought to prevent the construction of the dam to protect state-owned hatcheries from being flooded. Washington invoked a state law barring the city from constructing the proposed dam, but Tacoma successfully argued before the U.S. Court of Appeals for the Ninth Circuit that its federal license preempted state law.(4) In effect, the city -- a creature of the state -- had invoked federal law to defeat the will of the state government, its creator.

The federal government, however, rarely attempts so crudely to override state law. Instead, the issue of nonfederal officials' federally derived powers typically arises more subtly in the context of ambiguous federal grants. When the federal government bestows federal grants-in-aid on some category of state or local officials -- say, county commissions or the governor of a state -- the state legislature sometimes attempts to appropriate the revenue in order to control how it is allocated, either by directly ordering the federal money to be spent according to state priorities or by reducing state aid by the amount of the federal grant, thus effectively converting federal funds to state purposes. In response to these conversion attempts, federal grant law may then give the initial recipient the power to resist the state legislature's attempt to appropriate or offset the federal funds. The question then arises: Who controls the federal money?

For instance, at issue in Lawrence County v. Lead-Deadwood School District(5) was Congress's bestowal of federal funds on county governments to compensate them for tax losses resulting from the presence of federally owned, tax-exempt land (national parks, for instance) located within their boundaries. To control this federal money, the South Dakota legislature had enacted a statute requiring the county to pay over sixty percent of the federal revenues to the local school district.(6) The county, however, successfully argued that the federal grant preempted state law by giving the county unfettered and final authority to dispose of the federal revenue as it chose.(7)

A similar conflict arises when state legislatures attempt to appropriate federal grant revenue that has been awarded by the federal government to the governor. Several state supreme courts have wrestled with the question of whether state legislatures may appropriate such federal funds. Invoking state constitutional separation of powers doctrine, some state courts have held that the state legislature cannot exercise appropriation power over the money, at least absent clear federal authorization for such appropriation.(8)

This article attempts to answer the thorny constitutional and statutory questions that arise whenever the federal government uses either its regulatory power or its spending power to dissect the state, unpacking the black box of "the state" to liberate certain state or local institutions from the control of state laws. Should Congress be permitted to insulate local governments and state agencies from the control of the state legislature through preemptive regulatory legislation? And when Congress uses its spending power to dissect the state, how should courts construe ambiguities in the grant programs? Should courts construe federal statutes and state constitutions to protect the freedom of the state's subparts -- its local governments, agencies, governor, etc. -- from the centralizing power of the state legislature? To retard it and encourage legislative control? Or is there no intelligible way to generalize about these institutional questions across different grant programs?

As Part I of this article explains, neither precedent nor policy provides any clear guidance on these issues. Many courts and commentators seem to assume without argument that the federal government may not bestow powers on local governments when those powers are forbidden by the relevant state statutory or constitutional law.(9) Under this theory, mayors, governors, city councils, or county commissions can act as the agents of the federal government only if state law does not forbid it. I call this view the "principle of state supremacy." Notwithstanding conventional opinion to the contrary, there are no precedents from either the Supreme Court or any lower court explaining why or even whether the principle of state supremacy is actually part of established constitutional doctrine. As I argue in section I.A, one can make colorable arguments that the principle of state supremacy is implied by the Court's "state autonomy" precedents such as New York v. United States(10) and Printz v. United States.(11) But these are merely plausible arguments, and there are plausible arguments on the other side.

Considerations of sensible policy also do not unambiguously resolve this impasse in the precedents. On one hand, there is a respectable argument (which I lay out in section I.B) that the principle of state supremacy helps promote cost-effective and politically accountable local governance. Congress is probably not as well-suited for designing institutions for local governance as state legislatures. But, on the other hand, the principle of state supremacy has costs as well as benefits: it could conceivably pose a threat to cooperative federalism.(12) As I suggest in section I.C, the danger of state supremacy is that state laws might inefficiently prevent nonfederal officials and institutions -- governors and state legislatures, counties, cities, special districts, and other state agencies -- from competing with each other for federal funds. This intergovernmental competition is useful, because it allows Congress to bypass nonfederal officials who fail to implement federal policy faithfully and instead to delegate power to other nonfederal officials who demonstrate greater fidelity to federal policies. But such intergovernmental competition vanishes if the principle of state supremacy allows the state legislature to centralize the structure of state government and bar nonfederal officials from implementing federal policy.

The question, therefore, arises whether there is some mechanism by which the costs and benefits of the principle of state supremacy might be correctly balanced. In Part II, I propose such a device -- a canon of construction that I shall call "the presumption of institutional autonomy." Federal grant programs and state statutes and constitutions are frequently ambiguous about the role of the state legislature in controlling access to state and local institutions. The presumption of institutional autonomy instructs courts to construe this ambiguity to maximize the ability of state and local governmental institutions to spend such federal revenue free from state legislative supervision. The presumption of institutional autonomy preserves federal access to nonfederal officials by allowing these officials to carry out federal policies absent a clear statement to the contrary in state laws. Such a "plain statement" rule is analogous to federal-preserving canons of construction used in decisions like Gregory v. Ashcroft.(13) The plain statement rule in Gregory protects federalism through the national political process by barring federal intrusions into state sovereignty absent a clear congressional statement to the contrary.(14) Likewise the presumption of institutional autonomy protects nationalism through the state political process by barring state intrusion into federal intergovernmental relations absent a clear state-law provision to the contrary.(15)

In Part II, I explore how such a presumption might affect the judicial construction of federal grants to local governments(16) and governors.(17) Finally, in Part III, I explore whether the presumption of institutional autonomy might be used to protect local governments from state control outside the context of federal grant programs. The article examines two famous cases -- Bridgeport's petition for bankruptcy, which was resisted by Connecticut's state government,(18) and the City of Tacoma's effort to build a dam on the Cowlitz River, which was resisted by Washington's state government(19) -- to explore whether the federal government should be permitted to bestow powers on cities using regulations rather than grants.

  1. THE PRESUMPTION OF STATE SUPREMACY: PROMOTING INTERGOVERNMENTAL COMPETITION THROUGH LIMITS ON FEDERAL POWER

    As a matter of either precedent or sensible policy, what sort of role should the...

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