Federal Grants-In-Aid

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FEDERAL GRANTS-IN-AID

Federal grants-in-aid are subventions to state or local governments, private institutions, or individuals in support of a wide variety of undertakings. Early in the nineteenth century, governmental transfers of land were used to support road construction and agricultural education. Cash grants to states for diverse functions, such as vocational

education, forest fire prevention, and maternal health, came of age in the decades preceding the new deal. The public welfare programs established in 1935 greatly expanded the federal role in state finances. But it is the proliferation of categorical grants since 1960 that has rendered them the principal instrument of federal influence over social services and urban affairs. This recent extraordinary growth reflects an unplanned series of fragmented national responses to state fiscal inadequacy in the face of increased demand for collective goods.

Most of the current 500 or so national grant programs are intergovernmental, and federal monies under them constitute about one-quarter of the annual expenditures of both state and local governments. Notwithstanding federalism-inspired movements toward less directive federal grants, known as revenue sharing and block grants, most aid programs remain categorical, with narrowly defined undertakings and detailed conditions imposed on the receiving agencies.

Grants are made pursuant to Congress's broad discretion to spend for the general welfare and common defense. Like other national powers, grant-making authority rests on permissive and expansive constitutional principles established during the post-New Deal era of judicial reaction and retreat, typified by such cases as steward machine co. v. davis (1937) and Oklahoma v. Civil Service Commission (1947). The recurrent use of grant conditions to impose national solutions on traditionally local issues suggests that the political safeguard of federalism constraining Congress in the use of national regulatory power is less operative in the exercise of grant-making authority. (See taxing and spending power.)

For many years intergovernmental relationships in grant programs were understood to be administrative, cooperative, professional, and donative. Consequently, federal judges declined to intervene in grievances founded on grant programs. This aloofness markedly changed with the advent of antipoverty litigation in the late 1960s, when courts acknowledged that private beneficiaries of public welfare benefits were entitled to relief against state and local laws and practices inconsistent with federal grant conditions. Litigation over grants soon became a staple of federal court dockets, with suits by federal grantor agencies and local government grantees as well as by private parties. The judicial decisions, while providing a novel and potent injunctive remedy, broadly construed and uniformly validated federal goals and conditions. Federal courts thus placed their stamp of approval on Congress's expansive use of federal grants.

Grants differ from regulation in that they entail expenditures, not direct commands and sanctions, as the inducement for conforming activity. Because of this difference, courts maintain that state and local governmental participation in grant-in-aid programs is voluntary, not coerced. They consequently reject attacks on grant conditions, on the ground that onerous or intrusive requirements can be avoided by the "simple expedient" of not yielding and of refusing the grant. This choice of the state or city is largely fictional in light of citizen-industry mobility and the competition among states for resources. But courts cannot intelligibly resolve the question of whether federal grants have overborne the "free will" of government units.

On several recent occasions Congress has further reduced the difference between grants and regulation through the creation of new grant-in-aid directives without additional federal funding. Instead of monetary inducements, Congress has chosen to condition continuation of eligibility under well-established, and usually large, aid programs on conformity with its new requirements. This tying arrangement has the look of regulation, but its validity seems beyond question so long as there is a plausible relationship between the new program or condition and the national purposes of the older one.

For example, states may be required to supplement or to provide welfare payments in order to remain eligible for large Medicaid health care grants; the justification is that income maintenance and health-care support once were within a single grant program, and, more fundamentally, that subsistence payments significantly affect the health of the impoverished. Similarly Congress has tied the availability of federally insured mortgages to state participation in a flood control program; has tied the entire portmanteau of federal health dollars to state adoption of an elaborate apparatus for health systems planning and cost control; and has tied highway grants to state regulation of billboards, state enforcement of a federal speed limit, and state adoption of a national minimum age for drinking. There may be constitutional limits on tying new conditions to older grant programs, but the limits remain unenforced and unexplored.

The basic constitutional constraint on grant conditions is that they must be relevant to the purpose of a grant program. Here, as elsewhere, Congress has an exceedingly large discretion to determine relationships between means and goals. Fair treatment of private beneficiaries and efficiency are the two primary categories of relatedness, and they obviously can carry a good deal of baggage. In addition, Congress of late has established a web of elaborate "cross-cutting" conditions applicable to all or most grant-in-aid programs concerning, for example, the handicapped, environmental impacts, labor and procurement standards, citizen participation, merit hiring, and civil rights. Administrative enforcement of grant conditions played a major role in the desegregation of southern schools. To be sure, many of these restrictions would fall within congressional powers under the commerce clause and the fourteenth amendment, but there is significance in Congress's casting them as grant-in-aid conditions. The judicial assumption that states have the option not to accept the grants apparently makes it easier for Congress to impose new and controversial obligations on the states.

The tenth amendment limit established in national league of cities v. usery (1976) has not been applied to grants founded on the spending power, no doubt because such a ruling would eviscerate the current system of federal grants. Numerous federal grant conditions directly affect the structure and operation of state and local governments. Grant programs not only pervasively alter the spending priorities of governmental units, but, through the imposition of conditions, also allocate power between state and local governments (and occasionally between governors and legislatures), dictate hiring practices and employment benefits, and, by barring partisan political activity, limit the occasions on which officials administering departments having grants may be elected.

There is, finally, the Supreme Court's assimilation of grant programs to regulatory ones in its holding that state laws inconsistent with the terms of federal grants are invalid under the supremacy clause. Although not fully explicated, this theory has been used repeatedly to warrant injunctive relief against grantee noncomplicance with national conditions. Traditionally, federal administrative enforcement of grant conditions had been exceptionally lax, perhaps designedly so. Third-party suits for injunctive relief have altered this convention, while enlarging the role of federal courts in monitoring and enforcing grant programs. As a consequence, there is now more law and less discretion defining and governing the relationships under national grants.

Lee a. Albert
(1986)