If you were able to sit down and talk with the governor of your state about the challenges he or she faces as a governor, it wouldn't be long before the subject of federalism came up. Governor's will almost uniformly say that the national government, its programs and policies put too many constraints on their ability to lead their states. On the other hand, if you talk to a member of Congress or a federal bureaucrat, you're likely to hear complaints about how difficult it is to administer programs that treat people equally and fairly across all fifty states and about the problems the national government sometimes faces in getting states to effectively implement the programs it establishes.

In a nation with literally thousands of state and local governments, there are numerous opportunities for conflict between levels of government. Not too surprisingly, most of these conflicts have as much to do with money as they do with power. Some of the most significant controversies are detailed below.

Unfunded Mandates

Some of the most heated conflicts between the national government and the states center on the way the national government administers federal programs. In many instances, the national government will create programs which it then requires states to implement. While these national mandates tend to aggravate those in state government, the aggravation is compounded by the fact that the national government often fails to give the states any resources to pay for the implementation of the programs in question. National government policies that require states to implement programs or provide benefits without the financial support of the national government are called "unfunded mandates."

In 1995, the United States Congress passed the Unfunded Mandate Reform Act (UMRA) which required the Congress to explicitly consider the costs imposed by new legislation on state and local governments and on the private sector. Under the provisions of the Act, each bill considered by the Congress must be reviewed by the Congressional Budget Office to determine whether or not it includes and unfunded mandate and, if it does, the costs that will be passed on to state and local governments by the mandate. When a bill including an unfunded mandate comes before the Congress, and member can raise a "point of order," forcing twenty minutes of debate on whether or not the Congress should consider the bill in spite of the unfunded mandate. If a majority votes against consideration, the bill is rejected and no further action is taken on it.

While many state and local government officials still believe there are too many unfunded mandates, UMRA has forced the Congress to more carefully consider the "hidden" costs of the legislation it passes. Now, when bills including unfunded mandates are passed by the Congress, it is only after an explicit recognition of the mandate and a judgment by the Congress that the merits of the bill outweigh those concerns.

Fiscal Federalism

Each year, the national government sends to the states approximately $250 billion to fund a variety of programs. While the transfer of the funds is not controversial, the conditions on which states may use the money are. In many cases, the Congress will send money for narrowly defined purposes which leave the states little or no discretion about how to use the money. These kinds of transfers are called categorical grants. States and local governments prefer block grants, which are sums of money transferred to the states for broader purposes, e.g. education or law enforcement, with little or no explicit requirements about how to use the money for those purposes.

From 1972 to 1996, state and local governments received billions of dollars in no-strings-attached money from the national government under a program called "general revenue sharing." While some states would probably prefer a return to such a program, the Congress would probably be reluctant to give money to the states so freely. Congress frequently uses the money it sends to the states to "encourage" the states to do what it wants. For example, to receive federal highway dollars, a state must set its minimum drinking age at no lower than twenty-one years.


As has been noted, one of the more important trends in federalism today is the transfer of administrative control over programs from the national to state and local governments. This process is often called "devolution." While states often argue that they can do a better job administering programs than the national government, there can be significant tradeoffs when converting a national program into fifty separate state programs. The danger for states is that the national government will shift the responsibility for a program to the states without giving them the necessary resources to run it. This would be a particularly costly kind of unfunded mandate.

From a national perspective, the greatest potential problem posed by devolution is that there will be large disparities in the programs each state offers. Many fear that if states are given the responsibility for some programs without any minimal requirements, there will be a "race to the bottom" as states slash their budgets for those programs in favor of spending on other items in their budgets.

While the potential problems of devolution are significant, the transfer of administrative responsibility for welfare programs from the national level to the states is largely seen as a successful example of what can happen when government responsibilities and functions are "devolved" to the local level. Congress passed along to the states virtually all of the money it had spent on welfare in the past and the states have, through effective management and creative policy making, cut welfare roles and helped people move from welfare to work. If state-managed welfare programs are successful in the long run, support for more devolution is likely to grow.