Federalism and IGR

1. Federalism and IGR Hamilton versus Jefferson and McCullouch v. Maryland —Centralizing versus decentralizing forces in American IGR California Adoption Assistance Case—replicating Federal-State IGR in State-local relations PA 524 Professor Rivera

2. Federalism Defined • What is federalism? • Federalism describes a system of government in which sovereignty is constitutionally divided between a central governing authority and constituent political units such as states. • The division of power between the United States government and the state governments has been an ongoing divisive issue in American politics since the founding.

3. The Articles of Confederation • Adopted by Congress in 1777, it combined the Thirteen Colonies of the American Revolutionary War into a loose confederation. • Still at war with England, the colonists were reluctant to establish another powerful national government. Jealously guarding their new independence, the Continental Congress created a loosely structured unicameral legislature that protected the liberty of the individual states at the expense of the confederation. First founding document

4. The Articles in Practice • While calling on Congress to regulate military and monetary affairs, for example, the Articles of Confederation provided no mechanism to ensure that states complied with requests for troops or revenue. At times, this left the military in a precarious position. • Perhaps the most important power that Congress was denied was the power of taxation: Congress could only request money from the states. • Understandably, the states did not generally comply with the requests in full, leaving the confederation chronically short of funds. The states and the national congress had both incurred debts during the war, and paying congressional debts became a major issue. • The national government, such as it was, could do little to foster and drive a national economy—not even the issuance of a single national currency.

5. The Constitution: Is the National Government too Powerful? • Necessary and Proper Clause: Congress has the power “To make all Laws which shall be necessary and proper for carrying into Execution [its] Powers, and all other Powers of the United States.” • Supremacy Clause: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every state shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”

6. Comparing the Articles with the Constitution • Articles of Confederation, Article II. “Each state retains its sovereignty, freedom, and independence, and every power, jurisdiction, and right, which is not by this Confederation expressly delegated to the United States, in Congress assembled.” • United States Constitution, Amendment X. “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people. • What happened to the word “expressly”? Does it matter?

7. Bank of the United States? • At the urging of Secretary of the Treasury Alexander Hamilton, Congress passed a bill establishing a national Bank of the United States. • When the bill arrived on President Washington’s desk, he did not sign it immediately. He wanted to ascertain whether Congress could create a bank since it lacked explicit constitutional authority to do so. • He asked Hamilton, Secretary of State Thomas Jefferson, and Attorney General Edmund Randolph for their opinions on the bank’s constitutionality. The United States Bank, Philadelphia

8. Thomas Jefferson, “Opinion on the Constitutionality of a National Bank” (1791) • “To take a single step beyond the boundaries . . . Specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition.” • “It is known that the very power now proposed as a means [a national bank], was rejected as an end, by the Convention which formed the constitution.” • The enumerated powers “can all be carried into execution without a bank. A bank therefore is not necessary, and consequently not authorized by the [necessary and proper clause].” • “The constitution allows only the means which are ‘necessary’ not those which are merely ‘convenient’ for effecting the enumerated powers. If such a latitude of construction be allowed to this phrase as to give any non-enumerated power, it will go to every one, for there is no one which ingenuity may not torture into a convenience, in some way or other, to some one of so long a list of enumerated powers.

9. Alexander Hamilton, “Opinion as to the Constitutionality of the Bank of the United States” (1791) • “This general principle is inherent in the very definition of government, and essential to every step of the progress to be made by hat of the United States, namely: that every power vested in a government is in its nature sovereign, and includes, by force of the term, a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power, and which are not precluded by restrictions and exceptions specified in the Constitution, or not immoral, or not contrary to the essential ends of political society.” • “What was the precise nature or extent of this proposition [to establish a national bank at the Convention], or what the reasons for refusing it, is not ascertained by any authentic document, or even by accurate recollection.” [Even if it were known, it would not matter because] “whatever may have been the intention of the framers . . . that intention is to be sought for in the instrument itself.” • “[A bank] has a relation, more or less direct, to the power of collecting taxes, to that of borrowing money …”

10. McCulloch v. Maryland (1819) • Because of inefficiency and corruption, the United States Bank was very unpopular, and many blamed it for the nation’s economic problems. • As a result, Maryland sought to regulate and tax the branch of the bank located in Baltimore. • James McCulloch, a bank official, brought suit. • Can Congress establish a bank? • Can a state tax/regulate an instrument of the national government? James McCulloch

11. McCulloch v. Maryland (1819) • “Among the enumerated powers, we do not find that of establishing a bank. But there is no phrase in that instrument which, like the articles of confederation, excludes incidental or implied powers; and which requires that everything granted shall be expressly and minutely described. Even the 10th amendment, which was framed for the purpose of quieting the excessive jealousies which had been excited, omits the word ‘expressly.’” • “Its nature requires that only its great outlines should be marked, its important objects designated, and the minor ingredients which compose those objects be deduced from the nature of the objects themselves. . . we must never forget that it is a constitution we are expounding.” Chief Justice John Marshall

12. McCulloch v. Maryland (1819) • “Although, among the enumerated powers of government, we do not find the word ‘bank,’ we find the great powers to lay and collect taxes; to borrow money; to regulate commerce.... But the constitution of the United States has not left the right of Congress to employ the necessary means for the execution of the powers conferred on the government to general reasoning. To its enumeration of powers is added [the necessary and proper clause].” • “Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional.” • “The power to tax involves the power to destroy. . . . [the states] may tax all the means employed by the government, to an excess which would defeat all the ends of government. This was not intended by the American people. They did not design to make their government dependent on the States.”

13. Aftermath • The nationalist views articulated by Hamilton and Marshall eventually succumbed to the states-rights views of Jefferson with President Andrew Jackson’s appointment of Roger Taney as Chief Justice. • Subsequently, the pendulum has swung back and forth in the United States between a more nationalist interpretation and a more states-rights interpretation of the Constitution. • For example, in Hammer v. Dagenhart (1918), Justice William R. Day wrote: “In interpreting the Constitution it must never be forgotten that the nation is made up of states to which are entrusted the powers of local government. And to them and to the people the powers not expressly delegated to the national government are reserved.”

14. The California Adoption Assistance Case and IGR • In 1980, Congress passed the Adoption Assistance and Child Welfare Act to increase adoptions of hard-to-place children. The law established a matching grant program through which the federal government bore half the cost of adoption assistance grants given by states to families adopting eligible children. Two years later, California modified its Adoption Assistance Program (AAP) to conform to the federal legislation. • Under the federal program, state and local agencies had a great deal of discretion as to determination of grant amounts. However, there were a few restrictions typical of IGR.

15. CA case • 1) a grant award could not exceed the amount the child would have received from Foster Care; 2) the amount had to be determined through agreement between the adoptive parents and the state or local agency implementing the program; 3) and the agreement had to take into consideration both the circumstances of the adopting parents and the needs of the child. Means tests were not explicitly ruled out in establishing benefit levels. • Although the funds for the AAP came from the state and federal governments on a 50/50 basis, its administration was carried out by county governments. Although counties were not required to offer adoption services, all the populous counties in the state elected to do so. Ninety-five percent of placements were managed by the counties, with regional DSS offices handling the rest. The state reimbursed the counties for AAP administrative costs.

16. CA case • While counties were free to determine AAP grant levels, the state set certain guidelines. DSS required that eligible families complete a financial disclosure statement for use by the case worker in determining the circumstances of the adoptive family. DSS also required that adoption agencies immediately inform potential parents about the availability of AAP. Counties could not withhold information regarding the program to test whether the family might adopt without benefits. • Neither the state or federal governments mandated a minimum grant level. However, because receiving AAP automatically qualified a recipient for Medi-Cal (the state medical assistance program for needy families, using federal Medicaid and state funds) nearly all adoptions of special-needs children were accompanied by at least a small AAP payment. The maximum was set, by both federal and state law, at the amount the child would have received under Foster Care.

17. CA case • The two components of AAP grants were “Basic Maintenance” and “Special Needs.” Basic Maintenance grants covered food, shelter, and clothing expenses. Special Needs grants targeted individual requirements of the child such as physical and mental health therapy, special tutoring, and other medical needs that could not be met by Medi-Cal, California Children’s Services, the family's own private health plan, or other resources. A Special Needs grant might be needed, for example, since Medi-Cal did not cover the repeated replacement of orthopedic shoes that wore out rapidly due to a disability, and only two mental health appointments were allowed per month. The state had not issued guidelines stipulating which specific uses qualified for Basic Maintenance or Special Needs grants.

18. CA case • Many counties continued to approve relatively high Basic Maintenance grants even to relatively well-off families. Secondly, many counties cited “administrative ease” as a primary reason for establishing AAP grants at or near Foster Care rates. In other words, controlling costs was seen to be too time-consuming and difficult. Moreover, adopting families often became contentious if they discovered that they were being offered a lower AAP rate than was available in another county. • The easiest solution therefore, was simply to raise AAP rates to a highest common denominator.

19. CA case • Since a county’s workload and payment share decreased once an AAP adoption occurred, it was not to the county’s advantage to delay adoption. Finally, since AAP's primary goal was to increase adoptions, and knowing foster parent adoptions were favored by state policy, counties tended to grant the rate that the foster parents had come to expect. All of this made for an increase to maximum possible levels for AAP grants. • Political tensions between the State and counties also came into play. Some in DSS believed it was not politically feasible for the department to attempt to force the counties to contain AAP costs or to implement statewide guidelines for determining grant levels.

20. CA case—State-Local Political Factors • Decentralization (second-order devolution) to the counties had always been a popular political theme in California, and Governor Deukmejian’s Administration was committed to support local autonomy as a matter of principle. • Moreover, passage of Proposition 13 in 1978 had drastically reduced the local property tax base, severely limiting the ability of counties to raise revenues; therefore, any regulations threatening to increase counties’ administrative burden without the state compensating the counties, was likely to become contentious. All of this translated into political pressure for the State to allow relatively high funding allocations by the counties involved.

21. CA case • Counties were reimbursed for most of their administrative costs in running state and/or federal programs like Foster Care and AAP. For AAP, each county was given an annual allocation for overhead. This allocation was determined by the state and was based upon a number of factors including the expected number of adoptions, previous funding levels, cost of living adjustments (COLAs), and a state-derived unit cost for each county. Counties had not received COLA increases since 1985. • Counties often overspent their allocations and requested more money from the state.

22. CA case • Because the legislature tended tightly limit allocations of supplemental funds to DSS, counties attempted to recoup their expenditures by submitting high estimates of their expected caseload, by shifting funds from other programs, or by threatening to withdraw from the program. • Orange County, one of the largest, saw its funding increased after threatening to withdraw. When the state refused to yield to San Bernardino County’s insistence on more funding for day care licensing, the county dropped this licensing function. • One of the problems evident in the case is the lack of uniformity across counties in their AAP programming and funding practices, aside from the commonly-felt pressure to maximize grant amounts withiin state limits.

23. Conclusion • Federalism disputes have been continually present throughout American history. • Many issues can be viewed through the lens of federalism: i.e. abortion. • Does federalism have an ideological dimension? Are both liberals and conservatives consistent in their views on federalism no matter what the issue? Do conservatives always take a state’s rights position and do liberals generally take a nationalist stance?