Federalism represents a governmental system in which the same territory falls under the control of two levels of government. In general, an overarching national government has broader governance over expansive territorial areas while smaller states, subdivisions, and cities govern the problems that have a local concern. Both national government and smaller subdivisions are given the power to create laws, and both can have a certain degree of autonomy from one another. In the context of the United States, the Constitution has developed a “dual sovereignty” system, according to which the States have given a large part of their powers to the Federal Government while also preserving some degree of sovereignty (“Grant policies,” 2017). There are several examples of dual sovereignty described in the Constitution of the United States, such as the Supremacy Clause, the Tenth Amendment, limitations on the powers of the states, the powers of Congress, and others.
Therefore, federalism describes the Constitution’s framework of breaking down political power between the national government and the states. Through the separation of powers, which is concerned with the breaking down between the legislative, executive, and judicial branches, it becomes possible for each branch to check whether the other has been abusing its power, which is a checks and balances system. By breaking up the powers of the government and not having only one national government, much of the power is given to states that can closely collaborate with the people living in those states. As federalism empowers states to shape policies in ways that are meaningful to them, it allows them to shape policies that can serve the diverse nation that it is the United States.
An essential feature of federalism is its capacity to disperse access to power, wealth, and resources more widely to various territorial groups. This can help promote peace and stability because local people have more chances to state their opinions. Besides, it can allow encouraging improved governance with more equal and fair economic development. Therefore, the question of federal grants bears relevance in this context because they help both state and local governments access monetary resources to fund relevant public services. However, it is important for agencies to ensure the effective management and oversight of the grants.
Each year, billions of dollars in federal grants are given each year for projects and programs that are intended to benefit the public. Such assistance has its roots in the Constitution and its call to ensure the promotion of the general welfare among the population. Beginning in the 1970s, which signifies the boom of federal grant policies, further grant-related legislation has allowed further progress in Federal grant policy (“Grant policies,” 2017). The Executive Office of the President helps to carry out the laws with the help of its Executive Orders and Guidance that define administrative rules. In addition, the grant-making agencies help develop internal and external policies and procedures. According to the legal hierarchy, there are three states of grant development. Specifically, stage 1 includes statutes regulations, which is concerned with the Congress appropriating funds to Federal agencies and passing other legislation related to grants. At stage 2, executive orders memoranda circulars, the Executive Office of the President issues recommendations for legislation implementation. At stage 3, the agencies responsible for grant-making can develop administrative policies depending on such guidance.
The federal government has the capacity to award large sums of money, such as hundreds of billions of dollars in grants to both local and state governments annually. Federal grants provided to state and local governments provide around 31% of state budgets and 23% of state and local budgets taken together (Center on Budget and Policy Priorities, 2018). Such grants are essential for funding a large scale of services, such as health care, various social services, education, any infrastructural needs, and public safety. Many states may experience revenue shortfalls and find it challenging to achieve adequate revenues to support their services. Because of this, federal aid is essential because it can ensure that the programs do not get cut or eliminated (Center on Budget and Policy Priorities, 2018). Some federal grants given to state and local governments fall into the mandatory area of the federal budget, which can remain unchanged for some time.
The administration of the grants on a large scale comes with some barriers, which should be mentioned. For example, there is a limitation associated with streamlining because the management of grants entails addressing the duplicative, burdensome, and conflicting requirements in order to expend unnecessary resources that can cause issues to grant recipients. Another issue is transparency, which is illustrated in the Digital Accountability and Transparency Act of 2014, requiring federal agencies to increase the types of information available to the public on federal spending. Therefore, federal grants have been successful at expanding and standardizing information reported under the transparency act, while inconsistencies can still appear. Besides, there is a requirement for grantees to disclose the number of federal grants they receive publicly. Another way in which federal grants affect states and the federal government is concerned with increasing internal controls and oversight. Reducing improper payments and making more consistent grants closures is possible to help agencies improve their oversight and accountability.
When it comes to the influence of federal grants on states, and subsequently, local behaviors, it has been found that states and localities have substituted federal grants for some of their own spending. There is evidence that federal dollars can help encourage the stimulation of more than the expected state and local spending response. Other explanations entail the tacit understanding between federal appropriators and grant recipients as to how they will respond to federal money (Tax Policy Center, 2020). Besides grants, the federal government can also subsidize state and local governments by allowing federal income taxpayers to make deductions in the state and local taxes that have already been paid.
Considering the diverse impact of federal grants on both state and federal governments, it is important to understand the existing and future trends in the fiscal conditions of the sectors to determine how the federal grants can be best allocated. For example, the model provided by the US Government Accountability Office allows providing a broader perspective on the country’s fiscal outlook by simulating fiscal outcomes for the state and local government sectors (GAO, 2020). For example, both local and state governments face budgetary challenges because of the growth in healthcare costs. This means that Medicaid expenditures and the costs of health care compensation for state and local government employees and retirees, which are projected to grow at the rate that exceeds the GDP of the country.
References
Center on Budget and Policy Priorities. (2018). Policy basics: Federal aid to state and local governments.
GAO. (2020). Federal grants to state and local governments.
Grant policies. (2017).
Tax Policy Center. (2020). The state of state (and local) tax policy.