Speaking Notes

PADM 5301

April 13, 2010

Dr. Neubauer

WHERE WE ARE

• Study suggestions for the final are available on our course website.
• http://www.robertcat.net/spring2010/padm5301/index.html
• The final will be comprehensive.
• The final is April 20, in class, closed books and no notes.

CHAPTER 14 -- INTERGOVERNMENTAL RELATIONS

As you know, we have the three "levels" of government in the United States and there are differences among the governments in terms of . . .

• Their abilities to raise money effectively
• Their ability to spend money effectively to get things done

As a consequence, there is a system of grants that channels money around the system. The primary flows are . . .

• From the national government to the state governments
• From the state governments to local governments within states
• Sometimes from the national government directly to local governments
• Sometimes among governments at a level -- for example from city governments to county governments in exchange for services provided by the counties

With all these INTERDEPENDENCIES it must be hard to write a budget being unsure of what flows of revenues may be available from other governments.

There are basically three issues involved in all of this . . .

• Where's the money?
• What are the needs?
• Who calls the shots?

There is a kind of natural division of labor based on revenue sources and scope of abilities to get things done. For example, we have basically agreed that public education is best IMPLEMENTED at the local level with money provided from sources at all three levels of government.

The provision of medical care services for poor people (Medicaid) is funded from the national level (with matching funds required at the state level) and administered by the states, with the states having some DISCRETION in terms of implementation.

The underlying issues is, is this ONE NATION or FIFTY SOVERIGN STATES? It is both and that can be "messy" and complicated. We want some degree of UNIFORMITY across the entire nation while realizing that NEEDS AND PREFERENCES are not the same in every state and every local jurisdiction.

We have FEDERALISM.

We have UNITARY GOVERNMENTS (from the state level down).

We have REGIONAL GOVERNANCE.

Whether our POLITICAL FRAGMENTATION is a strength or a weakness is up for debate.

VERTICAL FISCAL IMBALANCE (page 585) -- different LEVELS of government have different CAPACITIES and ABILITIES.

HORIZONTAL FISCAL DIFFERENCES (page 586) -- differences among governments at the same level. Different states have different capacities and needs and as a consequences there is a NET REDISTRIBUTION of wealth from the Northeast and the Midwest to the South and parts of the west. (see page 592).

FEDERAL MILITARY BASES are important parts of the economies of many states and local areas, although the closing of a base is not always a "bad" event.

Some of the money that state and local governments receive from the national government is FORMULA DRIVEN.

Some decisions are made based on a "foundation plan," such as assuring that there will be AT LEASE some minimum amount of money available per student or per classroom.

MUCH OF THE MONEY FLOWS THROUGH GRANTS of one kind or another.

Grants often require MATCHING FUNDS.

Grants can distort local priorities.

Grants are sometimes a "hook" that causes a constituency to develop.

Grants can be a way for officials at the national level to get their way without the burden of actual implementation.

Governments can also sometimes put UNFUNDED MANDATES on one another.

The federal government sometimes THREATENS TO WITHOLD MONEY IT WOULD OTHERWISE MAKE AVAILABLE in order to get its way about something, such as a minimum drinking age.

If a local area has people with the EXPERTISE to write good grants, the local area can potentially pull in a lot of "outside" money (for better or for worse). Athens, Georgia is a good example.

MAJOR KINDS OF FEDERAL GRANTS

Categorical grants -- the money must be spent for specific things and there are "strings" attached. There is a lot of paperwork involved (compliance) and categorical grants are audited.

Revenue sharing -- this was available during the Nixon administration. It was basically a kind of untargeted stimulus. When the national government no longer had revenue to share it stopped.

Block grants -- these kind of fall between the two above. They allow state and local officials more DISCRETION.

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CONCLUSION

The flows of money in our nation's governments are shaped by federalism and the unitary form from the state level down.

Different governments have different FISCAL CAPACITIES and different abilities to IMPLEMENT public programs.

The two major issues are WHERE IS THE MONEY COMING FROM and WHO CALLS THE SHOTS?

Right now, power is probably swinging back toward the state and local governments as the fiscal capacity of the national government is increasingly strained by so many different needs.

What is fair? What constitutes social equity? Should funding for homeland security projects be equally distributed among the states or among the cities?