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C H A P T E R 3

THE INTERORGANIZATIONAL CONTEXT OF PUBLIC ADMINISTRATION

As a manager, you will interact not only with many others at your level of government or the independent sector, but also with those throughout our system of governance at the federal, state, and local levels. More and more, public administrators recognize that managing an agency requires paying attention to what happens in other organizations and that relations with those outside the agency are just as important as relations with those inside. This chapter examines the interorganizational context in which public administra- tors operate.

The traditional focus in public administration has been the agency, and that is the focus we have largely taken so far. However, given the “transformation of governance” that has occurred during the past decade, it may be more helpful to focus not on the individual agency, but on the relationships among many different groups: public, private, and non- profi t (Kettl 2000). Indeed, today more than ever, the effectiveness of public programs depends on the ability of various agencies to cooperate in processes of service delivery.

Government resources, from federal grants for public assistance to local funding for health and human services, go to a variety of actors, and although the funding usually contains guidelines and performance objectives, the implementing agencies often have a certain amount of leeway for running the program or for forging relationships with other groups to deliver the services.

For example, Temporary Assistance for Needy Families (TANF), the federal program that replaced Aid to Families with Dependent Children (AFDC) under the Personal Responsibil- ity and Work Opportunity Reconciliation Act of 1996, the federal welfare reform legislation, provides funding to the states for public assistance and welfare-to-work initiatives. The states rely on a variety of local government, for-profi t, and nonprofi t organizations for service deliv- ery. These organizations, in turn, may provide the services themselves, or they may contract with other organizations (again, public, private, or nonprofi t) for carrying out the programs.

In many cases, it’s possible for an individual or family to receive an array of public assistance without ever coming into contact with a government employee (Kettl 2000).

Another example of intergovernmental and interorganizational cooperation is in the area of emergency management and disaster relief. Hurricane Katrina was the sin- gle most destructive and costly natural catastrophe in U.S. history. In August 2005, the hurricane struck the Gulf Coast, affecting four states: Alabama, Florida, Mississippi, and Louisiana. Immediately after the disaster, 42 states and the District of Columbia received Presidential emergency declarations to shelter the evacuees. The Federal Emer- gency Management Agency (FEMA, which became part of the Department of Homeland Security in March 2003), in coordination with the American Red Cross, state and local

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governments, nongovernmental organizations, local communities, and businesses worked (and still work) on relief and recovery of the regions hit by the hurricane. FEMA provided $6 billion to the direct victims for housing and other assistance. An additional $4.8 billion in federal funds was reimbursed to the states for “mission assignments.” According to FEMA, “The U.S. Small Business Administration has approved more than $10.4 billion in disaster loans to homeowners, renters and businesses as a result of dam- ages caused by the hurricane. More than $15.3 billion has been paid out to National Flood Insurance Program policyholders” (www.fema.gov/news/newsrelease.fema?id=29109). What was most striking, however, was the failure of various public and private agencies to effectively coordinate services to the victims of the hurricane. Katrina made policy makers reevaluate the emergency management programs on national and state level, but also provides a signifi cant example of the importance of interorganizational cooperation and coordination.

These examples illustrate the complexity of the interactions triggered by federal policies and natural disasters. But equally complex relationships can develop as a result of a local initiative. A local community that wants to attract new industry might develop a coalition of government, business, labor, and education groups to promote the city’s image and to work with groups at other levels of government. These groups might include a state depart- ment of economic development to help contact prospective employers wishing to relocate. Or the city might request that the state or federal government designate a particular area in the city as an enterprise zone, thus permitting special tax incentives and other benefi ts for businesses willing to locate there. Again, a variety of government and nongovernment entities are involved in the task of economic development.

One can easily understand why the effectiveness of many public programs depends on the quality of the relationships among various organizations. Some analysts for this rea- son emphasize the importance of the interorganizational networks that develop in various policy areas (see Box 3.1). Obviously, the various groups and organizations involved in any policy arena do not report to a single director, nor are they structured in a typically hierarchical fashion. Rather, they are loosely joined systems that often have overlapping areas of interest, duplication of effort, and lack of coordination. Hult and Walcott wrote, “Governance networks link structures both within and across organizational boundaries. Like governance structures, networks may be permanent or temporary, formal or infor- mal. They may be consciously designed, emerge unplanned from the decisions of several actors, or simply evolve. A given governance structure may be part of one or several net- works” (Hult & Walcott 1990, p. 97).

Whether the growing dependence on such systems is a helpful development is a matter of some debate. Many experts have suggested that the use of intermediaries in the delivery of services is a major reason for the diffi culties many programs encounter. On the other hand, many such networks have proven enormously stable over time, and others have cap- italized on the inherent fl exibility and adaptability of such systems. In any case, because interorganizational networks are such an important part of the management of public programs, they deserve our attention.

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BOX 3.1

NETWORKS AND NETWORK MANAGEMENT

The fi rst type is a service implementation network that governments fund to deliver services to clients. Collaboration is critical because these networks are based on joint production of services, often for vulnerable citizens like the elderly, families on welfare, or the mentally ill. Integration of services is critical so clients will not fall through the cracks. The second type of network is an information diffusion network, whose central purpose is to share information across governmen- tal boundaries to anticipate and prepare for problems that involve a great deal of uncertainty, such as earthquakes, wildfi res, and hurricanes.

The third type of network (which often grows out of an information diffusion network) is a problem solving network. The purpose of this network is to solve a proximate problem like the response to the attack on the World Trade Center and the Pentagon on 9/11. The problem that the managers confront demands immediate attention and shapes the nature of the response and the set of interorganizational relations that emerge. Past cooperative rela- tionships prove useful in managing a problem solving network.

The fourth type of network is a community capacity building network, whose purpose is to build social capital in a community so that it is better able to deal with a variety of ongo- ing and future problems, such as substance abuse among youth. An effective community capacity building network allows a town or city to be more resilient and responsive when new problems emerge, as when methamphetamine emerged from drug labs to ravage certain communities.

Managing networks that do not have a hierarchical chain of command but which rely on trust and reciprocity as the levers of collaboration makes the tasks of managers much differ- ent from those in organizations. These tasks must be performed by network managers, like Coast Guard vice Admiral Thad Allen, who led the recovery of New Orleans and the Gulf Coast in the wake of the devastation of Hurricane Katrina. But the tasks must also be per- formed by the managers of organizations who are part of a network, for example, the local police chief with a DARE (Drug Abuse Resistance Education) program in district schools that is part of a substance abuse prevention network but also manages a police department.

There are fi ve different tasks that lead to effective network management. The fi rst task is the management of accountability. With no chain of command, this is a critical issue that both network managers and managers of organizations in a network must successfully negotiate. Key issues are determining who is responsible for what and how to respond to free riders who don’t contribute their fair share but continually demand more resources.

The second task is the management of legitimacy, which is more critical for networks than organizations. A public organization is created by law to serve a particular purpose. A network is usually a cooperative venture that must continually negotiate its legitimacy, particularly if, as is often the case, its boundaries cross the public, private, and nonprofi t sectors. Managers of organizations in networks must continually work to convince their stakeholders that their work with other organizations in the larger network continues to be valuable and worthwhile.

The Interorganizational Context of Public Administration 8 3

(Continued)

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(Continued)

Management of confl ict is the third task of network managers. Confl ict can develop from differing goals among the organizations in the network, and the result cannot be resolved by commands issued from on high. It is important that network managers listen to the voices of their members and provide mechanisms for confl ict resolution. These devices help to create dispute resolution mechanisms for confl icts that arise between managers of network organi- zations and network managers.

SOURCE: H. Brinton Milward and Keith G. Provan, “A Manager’s Guide to Choosing and Using Collaborative Networks,” Washington, DC: IBM Endowment for the Business of Government, 2006 (www.businessofgovernment.org/pdfs/ProvanReport.pdf).

■ The Development of Inter governmental Relations

In terms of your ability to operate public programs effectively and responsibly, you must understand the relationships among levels of government. There are various ways to defi ne the relationship between a larger comprehensive unit of government and its constituent parts. A confederation, for example, is a system in which the constituent units grant pow- ers to the central government, but do not allow it to act independently. A unitary system is one in which all powers reside with the central government, and various units derive their powers from that unit. France and Sweden, for instance, are characterized by unitary systems, as is the relationship between states and localities in the United States; localities hold only those powers specifi ed or permitted by the state.

The relationship between our national government and the states, however, is federal. It involves a division of powers between the two levels of government, federal and state. (Local governments exist under the legal framework of the states.) As you know, some powers are granted specifi cally to the central government (to conduct foreign relations, to regulate interstate commerce, and so on); some are reserved by the states (to conduct elec- tions, to establish local governments, and so on); and some are held by both levels (to tax, to borrow money, to make laws, and so on). (This system of governance is also referred to as federalism.) A federal structure has many advantages. It allows for diversity and experimentation, but can lead to the development of a highly complex intergovernmental system, a fact of life with important implications for the management of public programs.

The term intergovernmental relations is often used to encompass all the complex and interdependent relationships among those at various levels of government as they seek to develop and implement public programs. The importance of intergovernmental rela- tions has been recognized in several structural developments. At the federal level, a per- manent Advisory Commission of Intergovernmental Relations was established in 1959 and continued to operate until the mid-1990s. All states and nearly all major cities have a coordinator for intergovernmental relations (though the specifi c titles vary). Finally, many scholars and practitioners have begun to emphasize the managerial processes involved in intergovernmental relations by employing the term intergovernmental management.

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A key to understanding intergovernmental relations in this country involves under- standing the changing patterns used to fund public programs. Although intergovernmental relations consist of much more than money, fi nancial questions are inevitably at the core of the process. Thus, defi nitions of various types of grants or transfers of money (and property) from one government to another, are a helpful starting place.

Some grants give more discretion to the recipient than do others. Categorical grants or project grants are spent for only a limited purpose, such as building a new sewage treatment plant. Categorical grants have historically been the predominant form of grants in this country; however, in recent years, many categorical grants have been con- solidated into block grants, which are used for nearly any purpose within a specifi c func- tional fi eld, such as housing, community development, education, or law enforcement. For example, the recipient government might spend a law enforcement grant on police training, new equipment, or crime prevention programs. Finally, revenue sharing makes funds available for use by the recipient government in any way its leaders choose (within the law).

Grants may also be classifi ed in terms of how they are made available. A formula grant employs a specifi c decision rule indicating how much money any given jurisdiction will receive. Typically, the decision rule is related to the purpose of the grant (for example, money for housing might be distributed to qualifi ed governments based on the age and density of residential housing). A project grant, on the other hand, makes funds available on a competitive basis. Those seeking aid must submit an application for assistance for review and approval by the granting agency.

Grants may also be categorized as to the purposes they serve. Entitlement grants provide assistance to persons meeting certain criteria, such as age or income—for example, TANF or Medicaid. Operating grants are used in the development and operation of specifi c pro- grams, such as those in education or employment and job training. Capital grants are used in construction or renovation, as in the development of the interstate highway system.

Some basic information on federal-state-local interactions can be found at www.usa.gov. For coverage of the changing roles of state and local government, go to Governing magazine at www.governing.com.

NETWORKING

The Development of Intergovernmental Relations 8 5

Finally, grants may vary according to whether they require matching funds from the recipient agency. Some federal grants require the state or locality to put up a certain percentage of the money for the project; in the case of the interstate highway system, states contribute one dollar for every nine dollars of federal money. Other grants require different matching amounts, and some require no matching at all. Different types may be combined in different ways to create quite a variety of grant possibilities. A specifi c grant might be made available on a competitive basis strictly for use in programs for job training and may require local matching funds.

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Dual Federalism

Historically, the various grant types have been employed in different ways and in different times. The earliest period in our country’s intergovernmental history, a period that lasted well into the twentieth century, was characterized by what has been called dual federalism. Both federal and state governments sought to carve out their own spheres of power and infl uence during which there was relatively little intergovernmental cooperation—indeed, there was substantial confl ict.

However, some programs cut across the strict divisions of federal, state, and local responsibility associated with dual federalism. A notable example is the Morrill Act of 1862, which granted land to universities to establish agricultural programs and was the basis for the eventual development of “land-grant” colleges. It was important in the devel- opment of higher education, but was also precedent-setting in terms of the structure of its grants (Nathan et al. 1987). No longer were grants made in a fairly open-ended fashion; specifi c instructions were attached, requiring that they be used for “agriculture and the mechanical arts.” In addition, new reporting and accounting requirements were added as a condition of receiving the grants.

The adoption of grant programs such as the Morrill Act was accompanied by consid- erable anguish, because some saw such programs as a drastic departure from the dual federalism they preferred. The Morrill Act itself, signed by President Lincoln, had previ- ously been vetoed by President Buchanan, who commented: “Should the time arrive when the State governments shall look to the Federal Treasury for the means of supporting themselves and maintaining their systems of education and internal policy, the character of both Governments will be greatly deteriorated” (Nathan et al. 1987, p. 25).

In any case, the period of dual federalism was marked by considerable confl ict among the various levels of government. The federal government sought to deal effectively with the increasingly broad issues being raised in a more complex, urbanized society by developing new grant programs in such areas as highway construction and vocational education. The states, though they appreciated federal money, were cautious of federal interference in their spheres of responsibility. The localities, though creatures of the state and dependent on state grants of authority or money, sought to build their own politi- cal base. The resulting pattern of federalism resembled a layer cake, with three levels of government working parallel to one another but rarely together (see Figure 3.1).

You are a member of a task force that has been asked to consider ways your local parks and recreation service could be delivered at less cost to the city. You have been considering alternatives such as special charges, citizen involvement in service delivery, and limitations on services. But you strongly feel that parks and recreation are essential functions of local government and should be protected from cuts. What would you do?

What Would You Do?

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Cooperative Federalism

If the layer cake was the prevailing image associated with dual federalism, the marble cake was the image for the period that followed, notable for its increasing complexity and inter- dependence. As opposed to the confl ict and division of the earlier period, the emerging era of cooperative federalism was characterized by greater sharing of responsibilities. The marble cake image implied a system in which roles and responsibilities were intermixed in a variety of patterns vertical, horizontal, and even diagonal (see Figure 3.1).

The great impetus for the development of cooperative federalism was the Roosevelt program for economic recovery following the Great Depression. Although the majority of President Roosevelt’s programs were national in scope and could have been national in execution, a political choice was made to operate many of the programs through the states and their localities. The pattern of intergovernmental relations that emerged revealed a dramatically increased federal role, accompanied almost paradoxically by greater federal/ state/local sharing of responsibilities. In addition, there was greater attention to vertical relationships within functional areas such as social welfare or transportation.

The pattern of federal/state/local relations that emerged from the New Deal is illus- trated by several key programs. The fi rst was the Federal Emergency Relief Administra- tion, which provided grants to states for both direct and work relief. It also revitalized many weak state relief agencies. A variety of public works and employment security pro- grams also supplemented relief efforts. The best known was the Works Progress Admin- istration (WPA), a program that used federal money to hire state-certifi ed workers for locally initiated construction projects. Finally, the Social Security Act of 1935 brought the federal government into direct relief for the poor, disabled, and unemployed, an area that had previously been reserved for states and cities.

Through the middle part of the twentieth century, the structure of the various grant programs initiated at the federal level featured: 1. A federal defi nition of the problem 2. A transfer of funds, primarily to the states (rather than localities)

Marble Cake

Federal

Federal

Federal

Federal

Federal

Federal

State

State

State

State

State

State State

Local

Local

Local

Local Local

Local

Local Local

FIGURE 3.1

Images of American Federalism

Layer Cake

Federal

State

Local

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3. A requirement that plans for use of funds be submitted to the federal government 4. A requirement for state matching funds 5. A requirement for federal review and audit of the programs (Nathan et al. 1987) For the most part, these grant programs were categorical—that is, directed to a particu- lar category of activity, such as public works. Indeed, the use of categorical grants as the primary mechanisms for federal/state transfers continued until the 1970s. Throughout this period, various groups appointed to review the state of intergovernmental relations returned the same verdict: The federal government and the states should begin “coop- erating with or complementing each other in meeting the growing demands on both” (cited in Nathan et al. 1987, p. 33). Today, the principle of cooperative federalism is well established.

Picket-Fence Federalism

Through the 1960s, 1970s, and 1980s, there were dramatic shifts in the pattern of inter- governmental relations. Nowhere were these shifts more striking than in the contrast between the activism of the Kennedy and Johnson years and the cutbacks of the Reagan and Bush years. President Johnson used the phrase “creative federalism” to describe his approach to intergovernmental relations, which included a huge increase in the number and amount of federal grants available to states, localities, and other groups. Over three years, the number of available grants from the federal government grew from about 50 to nearly 400. Federal aid to states and localities rose from $7 billion in 1960 to $24 billion in 1970 (Wright 1987, p. 236). Interestingly, state aid to local governments also nearly tripled during this period.

The new federal programs focused mainly on urban problems and problems of the dis- advantaged. Medicaid, for example, the largest of the new grant programs, provided funds to states to assist in medical care for low-income people. (Medicaid is largely administered by the states [eligibility requirements vary from state to state], but it also requires state matching funds, which became a fi scal problem for many states.) But there were also new programs in education aimed directly at school districts, new programs in employment and training run by cities and other independent providers, and new programs in housing and urban development in major metropolitan areas.

Probably the most publicized domestic program of the Johnson years was the “War on Poverty,” launched with the passage of the Economic Opportunity Act of 1964. The War on Poverty and other Johnson programs were signifi cant for both their size and shape. Substantially more aid was aimed directly at local governments, school districts, and vari- ous nonprofi t groups, as opposed to the previous pattern of aid primarily to states. In addi- tion, there were requirements for detailed planning and for streamlined budgeting systems, as well as demands for public participation in management of the programs. Finally, and most importantly, the majority of new programs involved project grants, requiring grant applications for specifi c purposes. States and localities began to spend enormous amounts of time playing the federal grant game trying to obtain grants, searching for matching funds, and trying to meet planning and reporting requirements. As a result, intergovern- mental relations took on an increasingly competitive tone (Wright 1988, pp. 81–90).

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Through this period, the intergovernmental system was becoming increasingly domi- nated by the relationships among professionals within various substantive areas at various levels of government. For example, the relationship among mayor, governor, and president might be less important than that involving a local health department offi cial, someone from a state department of health, and the manager of a federal program in health care. A new image emerged, replacing the “cakes” of earlier periods—that of picket-fence fed- eralism. The horizontal bars of the fence represented the levels of government, and the vertical slats represented various substantive fi elds, such as health, welfare, education, employment, and training (see Figure 3.2).

President Nixon’s administration brought about a reaction against many of the devel- opments we have just described. Claiming that programs of the Great Society were too detailed to administer effectively at the local level and that subgovernments were coming to dominate the intergovernmental system, Nixon proposed what he termed a “New Federalism” that would reestablish greater local autonomy in the use of federal funds. Although a part of his program involved administrative changes, lessening certain requirements, the most notable changes President Nixon proposed involved changes in the structure of grant programs.

FIGURE 3.2

Picket-Fence Federalism

National Government

State Governments

Local Governments

President Congress

States Governors Legislators

Counties Cities Mayors Managers

The Big Seven Public Interest Groups

1. Council of State Governments 2. National Governors Conference 3. National Conference of State Legislatures 4. National Association of County Officials

5. National League of Cities 6. U.S. Conference of Mayors 7. International City Management Association

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SOURCE: From Understanding Intergovernmental Relations, 4th edition, by D. Wright © 2003. Reprinted with permission of Wadsworth, an imprint of the Wadsworth Group, a division of Thomson Learning.

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One way to return power to state and local leaders—especially elected leaders as opposed to program professionals—was through general revenue sharing. The Nixon plan for general revenue sharing involved transfers of money from the federal government to states and localities to use for any purpose they wished. The funds were distributed based on a complex formula, but once in the hands of the state or local political leader- ship, they could be used for tax reduction, transportation, community development, law enforcement, or any other area. First passed in 1972, the Nixon revenue-sharing program provided approximately $6 billion a year for fi ve years and was continued through the Nixon, Ford, Carter, and early Reagan years before being eliminated in 1986.

The Nixon administration also sought to consolidate large numbers of categorical grants into block grants, two of which were passed. The Comprehensive Employment and Training Act (CETA) provided funds to local “prime sponsors,” usually a local government or group of governments, for manpower training. Which specifi c programs would be devel- oped was up to the prime sponsor at the local level. Similarly, two weeks after President Nixon resigned, President Ford signed the Community Development Block Grant program (CDBG) consolidating several categorical grant programs, including urban renewal and the model cities program. Despite these successes in altering the pattern of federal grants, the Nixon and Ford years actually increased the total amount of aid available to states and localities.

The dependency of state and especially local governments on federal aid became more apparent during the administration of President Carter. The Carter years saw few dramatic departures in intergovernmental relations, continuing the general revenue sharing and block grants of the Nixon administration, though there was a greater tendency to target funds through categorical grants. Among the more important initiatives were expansion of public service employment under CETA, so local government jobs would be fi lled by the unemployed, and passage of the Urban Development Action Grant program to stimulate economic development in distressed cities.

As a former governor, President Carter was attentive to the needs of state and local governments to more effectively operate intergovernmental programs, so he proposed a series of administrative steps for improving intergovernmental management. In this effort, he worked closely with a group of seven major public interest groups, known as the PIGs, that were active in the intergovernmental system. These included such groups as the Council of State Governments, the National League of Cities, the National Governor’s Association, and others. Later in the Carter years, however, a new mood of fi scal restraint combined with Carter’s own fi scal conservatism, was something states and localities found diffi cult to handle. From the standpoint of state and local governments, however, the reductions of the late Carter years were just the beginning.

The Reagan and Bush Years

The Reagan and Bush administrations brought major structural changes in the pattern of fi scal federalism, including elimination of general revenue sharing and a reworking of the block grant system. However, these years were more signifi cant (in intergovernmental terms) because of the administration’s efforts to reduce the size of the federal government

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through a variety of tax and spending cuts and to return responsibility for major areas, especially social welfare, to the states.

A strong ideological commitment undergirded President Reagan’s efforts to eliminate federal funding and federal regulation of state and local activity wherever possible. In his inaugural speech, the president stated, “It is my intention to curb the size and infl u- ence of the federal establishment and to demand recognition of the distinction between the powers granted the federal government, those reserved to the states or to the people” (Reagan 1981). One way he proposed to do this was by turning back responsibility for a variety of federal programs, and the resources to pay for them, to the states. (President Bush employed the same ideology, emphasizing the term turnovers rather than turnbacks, in promoting his programs.) Proposals along these lines, however, quickly became inter- twined with the president’s 1981 efforts to reduce taxes and spending under the banner of supply-side economics, an approach that holds that decreased taxes and spending will stimulate capital investment and in turn economic growth (Stone & Sawhill 1984). The defense budget was protected by the Reagan administration, so the majority of cuts were sought in federal grant programs and general government operations. Indeed, during 1981, the Reagan administration achieved the fi rst absolute decline in federal expenditures in decades. As part of these reductions, federal grants were lowered from about $95 billion in fi scal year 1981 to about $88 billion in fi scal year 1982, with a major portion of the cuts coming in employment and training programs (Beam 1984, p. 420).

Meanwhile, state and local offi cials decried the depth of the cuts and the administra- tion’s failure to make available any revenue sources to pick up the slack, especially as the tax cuts failed to produce the expected economic growth. Moreover, concerns were increasingly voiced that efforts to balance the budget had been especially damaging to the poor—for example, by reducing eligibility for Aid to Families with Dependent Children (AFDC) payments (Nathan et al. 1987, pp. 52–57). The public was concerned about exces- sive spending, yet it became clear that neither Congress nor the public considered spending for social welfare, environmental protection, and infrastructure maintenance excessive.

Thus, by the middle of the second Reagan term, eligibility requirements in AFDC were restored; the environmental Superfund, designed to clean up toxic wastes and repair leak- ing underground tanks, was funded by Congress at a signifi cantly higher level than the president requested. Additionally, the Highway Trust Fund for highway improvement, including urban mass transit, was passed despite Reagan’s veto.

On the other hand, reductions continued in specifi c areas, most notably in general rev- enue sharing. Recall that the Nixon general revenue-sharing program had been continued through the Carter administration; however, early in the Reagan years, revenue sharing for states was eliminated. Finally, in 1986, revenue sharing for local governments was also ended. Many saw general revenue sharing as a way to equalize the disparity between rich and poor communities and allow greater fl exibility at the local level; others saw revenue sharing as providing too much money and discretion, especially to wealthy communities.

President Bush continued the Reagan approach to federalism, making important, but largely stylistic, gestures to the states and localities. In part, he could do little else. The budget defi cit continued unabated and led to the Budget Enforcement Act (BEA) of 1990. Under the new law, as we will see later, any legislation that exceeds the budget ceiling in its category will trigger an across-the-board cut in that category. In this way, the BEA

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effectively pits each domestic program against all others. When this legislation was com- bined with the savings and loan bailout, there was little enthusiasm left for expanding domestic spending, including state and local aid.

As mentioned earlier, President Bush continued the Reagan strategy of turning over various programs to the states, but just as in Reagan’s case, there was great skepticism about whether the proposed turnovers were based on a commitment to states’ rights and responsibilities or whether they were just a strategy to place the funding of various pro- grams in state hands. For example, the administration’s highway plan proposed to turn over four-fi fths of the federal highway system to the states with funding to be on a 60–40 basis, federal to state. According to Transportation Secretary Skinner, the proposal was designed not only to permit greater local fl exibility, but also to turn over more fi nancial responsibility to the states, shifting the burden to the states.

The Clinton Presidency

During the Clinton presidency, the philosophical foundation of New Federalism remained in place. The primary themes were regulatory reform and shifting decision-making authority to state and local governments. However, the character and scope of this devo- lution of power was interpreted in vastly different ways by the president, the Republican House, and the more moderate leadership in the Senate. In latter stages of the Clinton administration, state and local governments offered their own ideas on federalism and the overall system of intergovernmental relations. Such diverse viewpoints generated a number of questions concerning not only the state of federalism but also the implications for government practice.

Early on, President Clinton left little doubt as to his administration’s position on inter- governmental relations, a position characterized by a sensitivity to state and local govern- ments. The president quickly showed his gubernatorial roots, for example, by choosing four of his cabinet members from the subnational level. And within months of taking offi ce, the administration identifi ed the removal of burdensome federal regulations as a primary objective. In September 1993, President Clinton issued Executive Order 12866, which along with a subsequent order prevented federal agencies from imposing mandates without fi nancial support. Although administrative agencies would gain regulatory powers under the order, central review was to continue to ensure that new regulations conformed with the president’s priorities. President Clinton reinforced his stance soon after by issuing Executive Order 12875, establishing a system of state and local review of intergovernmen- tal regulations.

The Clinton administration’s New Federalist philosophy also carried over into pro- grammatic areas. In championing the drive to “end welfare as we know it,” for exam- ple, the administration transformed the nation’s system of public assistance by turning to mainly market forces for public well-being and placing service-delivery into the hands of nongovernmental actors. Key provisions in the 1996 welfare reform legislation included setting time limits on benefi ts, tying welfare to work requirements, handing over authority for welfare programs to state government, and limiting (in some cases eliminating) access to public assistance for legal immigrants and the disabled.

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President Clinton’s New Federalism could also be seen in his administration’s main community and economic development initiative, the Empowerment Zone/Enterprise Community Program, and its key education initiative, the Goals 2000: Educate America Act. In both programs, “the administration persuaded Congress to expand state and/or local discretion” (Walker 1996, p. 274), reinforcing the belief that by reducing federal regulations and handing decision-making power to the state and local levels, those clos- est to the issue would be in a better position to effect innovation and change in the given policy area.

Vice President Al Gore further advanced the administration’s position on intergovern- mental relations. In his National Performance Review (NPR) and related efforts, the vice president highlighted a variety of alternative strategies for managing public programs. These strategies, which echoed Osborne and Gaebler’s (1992) Reinventing Government, injected a new spirit of entrepreneurialism into the federal government. Gore’s NPR called for “a new customer service contract with the American people, a new guarantee of effec- tive, effi cient, and responsive government.” Although the vice president focused mainly on the national level, the philosophy driving his reinvention agenda fostered a greater appreciation for innovation by local and state administrators. NPR also featured several practical measures that affected intergovernmental relations, such as collapsing categori- cal grants into more fl exible funding streams and removing unfunded federal mandates.

On this latter issue, the adoption of New Federalist ideals extended beyond the Clinton administration. Regulatory reform and the removal of unfunded mandates became key issues for the 104th Congress. As cited in the Republican Contract with America, conservatives argued that federal agencies placed too great a burden on state and local administrations by imposing regulations without adequate fi nancial resources for their implementation. Republican lawmakers thus returned to two measures from the preced- ing Congress (H.R. 4771 and S. 993) and, with assistance from the Clinton administra- tion, revised the bills into the Unfunded Mandate Reform Act (1995). Under the resulting act, the cost of any future mandate would need to be spelled out by the Congressional Budget Offi ce. The act also raised the President’s Executive Orders (cited preceding) to a statutory level, binding agencies by law to fi nd less expensive, more fl exible ways of insti- tuting regulations.

During President Clinton’s second term, however, ties with the Republican Congress degenerated into political gridlock, and the administration devoted as much time to avoiding scandal as it did setting public policy. Though the two camps did come together on measures to eliminate the federal defi cit and reform the nation’s welfare system, the prevailing story from Washington during the last years of the twentieth century was one of partisan extremism, culminating in President Clinton’s becoming the fi rst elected president to be impeached, then acquitted, by Congress. Moreover, even the hallmarks of the period failed to gain support among many state and local governments. Governors and mayors across the country, though recognizing the need for fi scal constraint and welfare reform, remained concerned that the cost of the measures would, over time, fall primarily on the subnational levels administration.

The impact of NPR and “reinventing government” at the federal level also remained in question. While a variety of federal agencies implemented reform initiatives during President Clinton’s consecutive terms, many were fraught with political and administrative challenges.

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An example of this can be seen in the president’s national service initiative. In championing the National and Community Service Trust Act (1993), which created the Corporation for National Service (CNS), President Clinton set out to construct a model of reform based on the principles of reinvention and performance-driven government. But reform under CNS proved to be a diffi cult path. From the beginning, the agency was a target of controversy, with questions about whether CNS was simply a way to supplement funding of federal programs, questions about accountability, and concerns about how much competition was desirable in the public service.

CNS during its early years does not give a full picture of the reinvention movement. Examples can be found at all levels of government, and in the nonprofi t sector, as reform- ers strive to create a more responsive, entrepreneurial, and results-based system of gov- ernance. Indeed, reinvention, compared to many political reform movements, has had a fairly long lifespan. On the other hand, a growing number of scholars and practitioners have taken issue with the assumptions underlying the reform agenda. Although few would dispute the values of making federal agencies more responsive, or ensuring effectiveness in delivering public services, many have come to recognize that productivity and perfor- mance should not be the only measures of success.

The Bush Administration

President George W. Bush continues the New Federalism of his predecessors, as evident in his agenda to streamline the federal government, increase the role of nongovernmen- tal organizations (nonprofi t, for-profi t, and faith-based) in the policy process, and shift to more market-based models of service delivery (see Box 3.2). For instance, the Bush administration’s fi rst legislative victory came with a $1.3 trillion tax cut, which support- ers said would force the federal government to tighten its belt on spending and stimu- late economic growth by returning money to taxpayers. (Many compared the measure to the major tax cuts early in the Reagan administration.) Since then, Bush has succeeded in pushing through three more major tax cuts that are expected to reduce revenue by $1.9 trillion over a 10-year period.

The Bush administration has also emphasized program decentralization. As mentioned in Chapter 2, the president used one of his fi rst executive orders to create the Offi ce of Faith-Based and Community Initiatives (see www.whitehouse.gov/government/fbci/ index.html). The goal of this program is to strengthen the role of faith-based and com- munity organizations in addressing social problems by removing barriers to their partici- pation in federally funded programs and increasing funding targeted specifi cally at these groups. Since the inception of the faith-based initiative, nearly $200 million of federal funding has been awarded to support the work of organizations in social services, men- toring, and addiction recovery programs. Although many nonprofi t leaders support the program, which expands the amount in social service spending for which faith-based organizations could compete, others (including many religious leaders) are concerned that without a substantial increase in the level of funding, the Bush initiative has the effect of pitting religious groups against each other for a share of the pie. Others argue that although federal funding helps enhance the role of faith-based nonprofi ts as service

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providers, most of the smaller religious organizations simply lack the expertise needed to administer federal grants.

BOX 3.2

TRANSFORMATION OF GOVERNANCE: GLOBALIZATION, DEVOLUTION, AND THE ROLE OF GOVERNMENT

Over the last generation, American government has undergone a steady, but often unnoticed, transformation. Its traditional practices and institutions have become more marginal to the fundamental debates. Meanwhile, new processes and institutions—often nongovernmental ones—have become more central to public policy. In doing the people’s work to a large and growing degree, American governments share responsibility with other levels of government, with private companies, and with nonprofi t organizations.

This transformation has two effects. First, it has strained the traditional roles of all the players. For decades, we have debated privatizing and shrinking government. While the debate raged, however, we incrementally made important policy decisions. Those decisions have rendered much of the debate moot. Government has come to rely heavily on for-profi t and nonprofi t organizations for delivering goods and services ranging from antimissile systems to welfare reform. It is not that these changes have obliterated the roles of Congress, the president, and the courts. State and local governments have become even livelier. Rather, these changes have layered new challenges on top of the traditional institutions and their processes.

Second, the new challenges have strained the capacity of governments—and their nongovernmental partners—to deliver high-quality public services. The basic structure of American government comes from the New Deal days. It is a government driven by func- tional specialization and process control. However, new place-based problems have emerged: How can government’s functions be coordinated in a single place? Can environmental regula- tions fl owing down separate channels (air, water, and soil) merge to form a coherent envi- ronmental policy? New process-based problems have emerged as well: How can hierarchical bureaucracies, created with the presumption that they directly deliver services, cope with services increasingly delivered through multiple (often nongovernmental) partners? Budget- ary control processes that work well for traditional bureaucracies often prove less effective in gathering information from nongovernmental partners or in shaping their incentives. Personnel systems designed to insulate government from political interference have proven less adaptive to these new challenges, especially in creating a cohort of executives skilled in managing indirect government.

Consequently, government at all levels has found itself with new responsibilities but without the capacity to manage them effectively. The same is true of its nongovernmental partners. Moreover, despite these transformations, the expectations on government—by citizens and often by government offi cials—remain rooted in a past that no longer exists. Citizens expect their problems will be solved and tend not to care who solves them. Elected offi cials take a similar view: They create programs and appropriate money. They expect government agencies to deliver the goods and services. When problems emerge, their fi rst instinct is to reorganize agencies or impose new procedures—when the problem often has to

The Development of Intergovernmental Relations 9 5

(Continued)

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(Continued)

do with organizational structures and processes that no longer fi t reality. The performance of American government—its effectiveness, effi ciency, responsiveness, and accountability— depends on cracking these problems.

SOURCE: Donald F. Kettl, “Transformation of Governance: Globalization, Devolution and the Role of Government.” Public Administration Review 60, no. 6 (November/December 2000): 488–497. Reprinted by permission.

Another example of President Bush’s New Federalism can be seen in his administration’s reliance on the market for delivering public services. In July 2001, the president outlined a plan to reduce the cost of prescription drugs for the elderly. The Bush plan offered seniors the opportunity to join buying clubs, which would be administered by for-profi t fi rms, and use discount cards to save 15 to 25 percent on their pharmaceutical purchases. Several such buying clubs already existed, including a cooperative venture between Merck-Medco, a pharmaceutical fi rm, and the Readers’ Digest Association. Some health-care companies and other Bush supporters viewed the plan as a way to improve access to health care for the elderly, but doing so without increasing federal spending. Critics said the proposal would not produce the types of changes needed in the Medicare system. They argued that under the Bush plan pharmaceutical companies would still be able to set their own prices, and, rather than relying purely on the market, the federal government should require dis- count clubs to negotiate with drug manufacturers and pharmacists should be asked to set prices prospectively. President Bush agreed that the proposal was simply the fi rst step in a major overhaul of the thirty-six-year-old federal program, adding that the government should explore additional market approaches like expanding the role of health mainte- nance organizations and other private health plans (Pear 2001, p. A1). In 2003, Congress passed Bush’s Medicare Prescription Drug Improvement and Modernization Act, which provides discount cards until 2006, when seniors will be able to buy into a federally supported prescription drug insurance program.

His commitment to partnering with the private sector and to nongovernmental strate- gies continues. In 2004, Bush fi rst proposed allowing younger workers to privately invest some of their Social Security contributions instead of paying into the Social Security system. This continues as one of his major domestic initiatives. Supporters claim that doing so will help workers to realize greater gains and thus build a bigger nest egg toward retirement. Assuming workers will receive a higher rate of return in these private accounts, the pressures on the Social Security system will lessen. Critics argue that doing so will cause a reduction in benefi ts and, rather than saving the system, will ultimately cause greater fi nancial problems.

Judicial Infl uence

One fi nal point relates to the role of the judiciary in shaping intergovernmental rela- tions. Through the 1990s, students of federalism became increasingly aware of the role of the judiciary, especially the Supreme Court, in defi ning the relationship between the

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federal government and the states. Although the recent judicial activism has produced varied results, with the scope of federal authority limited in some cases and reaffi rmed in others, an important outcome emerged. The Court once again established itself as “a conscious arbiter of the respective powers of the national government and the states” (Wise 2001, p. 343).

At issue has been Congress’s constitutional authority to regulate activities at the state level. For much of the twentieth century, the Commerce Clause, which gives Congress the power to regulate trade between the states, has been the center point of federal legislation. However, regulations also have been imposed under the Fourteenth Amendment, which grants Congress the power to enforce by appropriate legislation the rights provided in the amendment. Regardless of its legal basis, federal regulatory authority has been allowed to expand virtually unchecked by the Court since the 1940s. In fact, some scholars of feder- alism began to wonder whether any boundaries would be established to limit the scope of the federal government relative to the states (see Wise 1998, 2001). The tides began to change, however, during the 1990s.

Among the fi rst key decisions setting parameters on Congress’s regulatory power was Gregory v. Ashcroft (1991). In this case, the Court ruled that the Missouri constitution’s rule that state judges must retire at age seventy does not violate the federal Age Discrimina- tion Act, as the Equal Employment Opportunity Commission had ruled. “The signifi cance of this [the Gregory ruling] is that it bars individuals and groups who wish to use fed- eral statutes of general applicability adopted under the Commerce Clause to attack state regulation in federal court from doing so, unless Congress makes it clear that the statute applies to the states” (Wise 2001, p. 344). Justice O’Connor, in her opinion, emphasized the constitutional principle of dual sovereignty and the importance of maintaining a cer- tain degree of state authority.

Congress’s regulatory power under Commerce came into question again in United States v. Lopez (1995) and United States v. Morrison (2000). In Lopez, the Court con- sidered a challenge to federal restrictions placed on handgun possession in a school zone. The Morrison case focused on provisions in the Violence Against Women Act, which allow victims of violent crimes motivated by gender to seek federal civil action. The Supreme Court ruled in both cases that Congress had overstepped its regulatory jurisdiction because the statutes were not consistent with the authority afforded under the Commerce Clause. At the heart of the Court’s decisions was the premise that clear lines must be established between national and state powers and that, under Commerce, these lines must be limited to matters of interstate trade.

Of course, the Lopez and Morrison decisions focused primarily on restoring a balance of regulatory power between the national government and state governments. The recent judicial activism, however, also can be seen on issues of administration, such as in New York v. United States (1992) and Printz v. United States (1997), where the Court placed restrictions on Congress’s ability to compel state and local actors to implement federal statutes.

The New York case involved a challenge from local governments against the Low- Level Radioactive Waste Policy Act, which required state and regional authorities in certain circumstances to assume ownership of radioactive waste and commanded them to implement provisions of the federal legislation. The Court ruled unconstitutional

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both alternatives, stating that Congress must not view state/local governments as “mere political subdivisions . . . [or] regional offi ces” (Wise 1998, p. 95) of the national gov- ernment and must afford the level of state sovereignty guaranteed under the Tenth Amendment.

In Printz, the Court reviewed a challenge to provisions of the Brady Handgun Violence Prevention Act, which mandated background checks on prospective buyers and required local law enforcement offi cers to serve as entities of the national government in executing the regulation. The federal government, in an interesting twist, argued that unlike New York, the Brady Act did not place responsibility on the states for policy making and that, given the rewards, the cost to the states would be minimal. The Court disagreed. In its rejection of the federal claim, the Court stated that New York established, in very clear terms, that Congress cannot command state offi cials to execute or administer federal reg- ulations, nor can the national government bypass the New York limitations by directly enlisting state actors.

However, the decisions cited here should not be taken as a complete shift toward state sovereignty. Several recent rulings, including Davis v. Monroe County Board of Educa- tion (1999), Saenz v. Roe (1999), and Sabri v. United States (2004), have reinforced the national government’s capacity to monitor state activities.

In Davis, for example, the Court reaffi rmed Congress’s authority to establish state lia- bility for certain actions as part of the states’ agreement to receive federal funding. The majority of the justices ruled that, under the Spending Clause, Congress could use its control over appropriations to enforce constitutional rights—in this case, the guarantee against third-party discrimination in public schools—as long as the language in the fund- ing program remained clear enough so that states would have adequate notice of the fed- eral requirements.

The main issue in Saenz was the state of California’s revision to its welfare laws to set a twelve-month residency requirement for certain levels of public assistance. Although the Court had previously invalidated residency requirements for eligibility (in Shapiro v. Thompson [1969]), Secretary Saenz, of California’s Department of Social Services, claimed that the new welfare reform provisions did not exclude new arrivals from welfare ben- efi ts but simply maintained their assistance levels to those of the states where they resided previously. The Court disagreed, ruling that the Fourteenth Amendment does not assign levels of citizenship according to length of residence but instead links citizenship with residence generally. Although the Court appreciated California’s desire to reduce the cost of welfare benefi ts, a majority determined that fi scal effi ciency could not be allowed to outweigh citizen guarantees against discrimination.

In the Sabri case, Sabri was accused of offering bribes to a Minneapolis councilman to facilitate city construction projects. The constitutional question before the Court was whether Congress could criminalize such bribes under its Spending Power. Even though it was not possible to establish a direct link between the bribes and a particular federal proj- ect, the Court held that the federal government could act to safeguard the integrity of local government administration involved in federally funded projects.

When taken as a whole, the decisions cited here present a mixed image of federalism (see Box 3.3). On one hand, the Court clearly has reconsidered its deference to Con- gress on issues of intergovernmental relations, a practice it had followed throughout

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the twentieth century, setting restraints on the scope of federal power. On the other hand, federal regulatory authority in other areas has been reaffirmed, particularly under the Spending Clause and the Fourteenth Amendment. Despite the significance of these decisions in themselves, the implications go even further. Indeed, the most significant outcome is that the Court appears to have reassumed its responsibility for judicial review on questions of federal-state authority, which it had all but abandoned in Garcia v. San Antonio Metropolitan Transit Authority (1985). (The Garcia case will be discussed in more detail in the next section.) Given not only the nature of the decisions but the mere fact that the judiciary has been willing to intervene, we can be assured that the Supreme Court once again has become the “arbiter-in-chief” in our federal system (Wise 1998, p. 98).

The State and Local Perspective

We have described the system of intergovernmental relations primarily from the federal perspective, but states and localities are also major actors in the intergovernmental sys- tem, both as they participate in federal programs and as they interact state to state, state to locality, and locality to locality. Here, also, intergovernmental relations have seen great changes. Although budgetary shifts have created serious problems for state and local governments, the governments have proven remarkably well equipped to deal with these dilemmas, both fi nancially and administratively.

The authority of states protected under the Constitution, based on a balance of power between the national government and the states and the principle of dual sovereignty. Limitations placed on Congress’s regulatory authority under the Commerce Clause of the Constitution.

Gregory v. Ashcroft (1991) Gregory v. Ashcroft (1991) Gregory v. Ashcroft (1991) United States v. Morrison (2000)

State sovereignty reaffi rmed, in that state and local actors cannot be compelled by Congress to implement federal regulatory statutes.

New York v. United States (1992) Printz v. United States (1997)

The authority of Congress to regulate activities in the states, based on powers granted under the Spending Clause of the Constitution. State and local actors may be required to accept certain standards as a condition of receiving federal funds.

Davis v. Monroe Co. Board of Education (1999) Saenz v. Roe (1999)

SOURCE: Charles R. Wise, “Judicial Federalism: The Resurgence of the Supreme Court,” Public Administration Review 61, no. 3 (2001): 343–358. Reprinted by permission.

BOX 3.3

BALANCE OF POWER? THE CHANGING FACE OF JUDICIAL FEDERALISM

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Funding Patterns

Although federal aid to state and local governments declined in the early 1980s, this trend soon reversed. Federal grant funding grew from $91.4 billion in 1980 to $225 billion in 1995 and $434.1 billion in 2006 (Table 3.1). This roller-coaster ride adversely affected both state and local governments, and federal aid has still not returned to the levels of 30 years ago. Throughout the 1980s and 1990s, the impact on state and local govern- ments, as well as other service delivery organizations, was severe. As Table 3.1 shows, in 1980 total federal grants made up about 27.4 percent of state and local government expenditures. The fi gure dropped to about 22.8 percent by 1995 but increased (slightly) to 23.3 percent in 2006.

All of these changes occurred at a time during which state governments were experienc- ing signifi cant fi scal stress related to other factors such as the recession; inelastic tax sys- tems; growing expenditures in health, poverty, and immigration; and so on. For example, states spent approximately $40.1 billion on health care in 1996, and by 1999, that number had almost quadrupled to $157 billion (U.S. Census Bureau 2002). Medicaid accounted for 13 percent of state spending in 1990; today it accounts for almost a quarter of state expenditures (PA Times August 2004). Consequently, state and localities found it neces- sary to curtail or even terminate many programs, while at the same time trying to develop new sources of revenue. According to researchers at Harvard University, states continue to face serious budgetary strains, which can be expected to last through the decade. Part of the reason for this is that spending has surpassed the ability of states to collect revenues.

TABLE 3.1

Federal Grants: Federal Aid to State and Local Governments 1980–2006 (in billions of dollars)

Composition of Federal Grants

Fiscal Year

Payments for Individuals

Physical Capital

Other Grants

Total Grants

State/Local Expenditures (%)

1980 32.6 22.6 36.2 91.4 27.4

1985 50.1 24.9 30.9 105.9 22.0

1990 77.3 27.2 30.9 135.4 18.9

1995 144.4 39.6 41.0 225.0 22.8

2000 182.6 48.7 54.6 285.9 22.2

2006 272.6 64.1 97.4 434.1 23.3

SOURCE: U.S. Offi ce of Management and Budget, Crosscutting Programs, Budget of the United States Government, FY2008, Table 8.3 Trends in Federal Grants to State and Local Government [Electronic version], p. 91, Retrieved March 25, 2007, from www.whitehouse.gov/omb/budget/ fy2008/pdf/apers/crosscutting.pdf.

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Although median state spending per capita increased threefold between 1982 and 2002, revenues have grown much more slowly. In 2001 alone, state revenues decreased over 7 percent (PA Times August 2004).

Without question, the last several decades have presented a variety of fi scal challenges to state and local governments. One surprising development, however, is that the states have proven capable of managing their new responsibilities far better than many predicted. Indeed, although the federal government has a huge defi cit, many states have continued to operate with balanced budgets over the past decade.

An important boost to state governments came in 1998, as attorneys general across the country reached a landmark settlement with tobacco companies to recoup expenditures from health costs associated with smoking and other forms of tobacco use. The settlement, which amounts to $246 billion nationally over the next twenty-fi ve years, has given states much-needed resources for antismoking campaigns, health care, and a variety of other needs. In fact, since the settlement set few limitations on how the proceeds could be used, the approximately $8 billion per year has been used for a wide variety of purposes.

Once considered a weak link in the federal system, over the past thirty years, states have dramatically increased their capacities. Although there are still considerable varia- tions in states’ powers, most states have undertaken important institutional reforms (such as developing legislative audits), expanded the scope and professionalism of their opera- tions (to include new services in areas such as energy planning and conservation or new programs in areas such as productivity improvement), and demonstrated remarkable fi scal restraint. Indeed, the states are operating balanced budgets, and some are even making investments for the future.

The states also are moving into areas of responsibility once thought to rest at the federal level. International trade is one area where shifting roles already seem to be taking place. Whereas the federal government has traditionally played the leading (if not the exclusive) role in foreign affairs, economic forces are precipitating much greater state and local activ- ity in the international arena. For example, all states have offi ces of economic development involved in some way with international economic development. Through such units, the states provide local businesses with seminars and conferences on how to market them- selves overseas. Over 40 states also maintain permanent offi ces overseas, with some of the larger states having offi ces in several countries.

Preemptions and Mandates

Preemptions As discussed previously, although our federal system of government estab- lishes certain federal powers, reserves certain powers to the states, and permits certain actions at both levels, there has long been controversy about the exact defi nitions of these categories. Intense controversy surrounds the issue of the right of the federal government to preempt the traditional powers of states and localities or to coerce states and localities into doing (or not doing) certain things.

As a case in point, the Fair Labor Standards Act (FLSA) of 1938 set the minimum wage and the maximum hours that could be worked before overtime pay was required. The act originally applied only to the private sector, but 1974 amendments applied it to all state

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and local governments. Many state and local offi cials argued against the amendments, citing the diffi culties in applying the standards to government—for example, how do you measure the hours a fi refi ghter works in off-and-on shifts of several days’ duration? Soon the amendments were challenged in court, and, in the case of National League of Cities v. Usery (1976), the Supreme Court decided that the functions of “general government” were part of the powers “reserved” to the states by the Tenth Amendment and therefore could not be regulated by the federal government. Consequently, the FLSA did not apply.

The Court’s ruling in many ways raised as many questions as it answered, especially around the issue of what could be included under the notion of “general government.” The confusion persisted until, nearly ten years later, the Court reviewed a case that sought to determine whether the San Antonio transit authority was performing “general govern- ment” functions and was therefore exempt from the Fair Labor Standards Act.

In Garcia v. San Antonio Metropolitan Transit Authority (1985), however, the Court went beyond the narrow question of whether transit is a general government function and decided that, under its responsibilities to regulate commerce, Congress did in fact have the power to intervene in the affairs of state and local governments.

The effect of Garcia, a direct reversal of the Court’s earlier position in the Usery case, was to remove questions about the scope of the federal government’s powers from the realm of judicial inquiry. The Court essentially held that states have suffi cient input into the national legislative process, through the election of members of Congress and the infl u- ence of their governors and mayors, to protect themselves politically from burdensome legislation. That being the case, the question of whether the federal government could act in areas previously believed reserved to the states should be decided through legislation rather than judicial action. The rights of the states were, therefore, viewed as raising politi- cal rather than judicial questions.

A similar argument was developed by the Court in South Carolina v. Baker (1988), a case viewed by many at the time as putting a nail in the coffi n of the Tenth Amendment rights of the states. South Carolina asked whether the federal government had the right to dictate the form of bonds issued by the states. The Court not only answered “yes,” but it also indicated that the federal government had the right to tax income earned on tax- exempt bonds. Obviously, if the federal government had this right, then the states would have to compete directly with private fi rms issuing bonds. Although political leaders tried to assure the bond market that the federal government would not try to balance its budget by intruding on the states’ abilities to issue tax-exempt bonds, several such proposals were introduced in Congress. As you can imagine, states and localities were incensed at this

For data relating to federal funding to state and local governments, go to the Statistical Abstract of the United States at www.census.gov/prod/www/statistical-abstract-1995_2000. html or to the Offi ce of Management and Budget at www.whitehouse.gov/omb/budget/ fy2005. Analyses of the changing character of intergovernmental relations under the “New Federalism” can be found at http://www.urban.org/center/anf/index.cfm.

NETWORKING

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intrusion into a critical area of state fi nancing, but, again, the states were precluded from a judicial remedy and asked to rely on their political power to see that Congress did not act to tax state and local bonds.

The Garcia and South Carolina cases open the door for the federal government to move into areas once thought to be the purview of state and local governments. Certainly, state and local offi cials, who have seen the federal government act in areas from rat control to minimum drinking ages, have been skeptical of the self-restraint of Congress. At a mini- mum, Garcia and South Carolina set a precedent for expanded federal action directed at state and local governments.

We should not, however, rush to judgment, because many of the Supreme Court rulings handed down in the past decade have been decided by 5–4 votes, and in several key cases, the majority has clearly reaffi rmed the sovereignty of state governments (for example, New York v. United States [1992], Seminole Tribe of Florida v. Florida [1996], Printz v. United States [1997], and Alden v. Maine [1999]). In fact, a recent commentary on emerging judi- cial federalism noted that majority opinion maintained the theme “that state sovereignty may not be invaded, not only because it is rooted in the nation’s constitutional structure, but also because such invasion undermines the very operation of American democracy” (Wise 2001, p. 354).

These cases deal with the powers of the federal government over states and locali- ties, but somewhat less complex issues have been raised with respect to the powers of the states over local governments. As noted, our intergovernmental system does not allocate separate spheres of power to state and local governments, but rather treats local govern- ments merely as “creatures of the state,” having only those powers granted by the state. In what has come to be known as Dillon’s Rule, Judge John Dillon declared in 1868 that municipalities had only those powers granted in their charters, those fairly implied by the expressed powers, and those essential to the purposes of their being granted a charter. In other words, Dillon’s Rule allowed for state control over all but a narrow range of local activities. Dillon’s Rule has been somewhat relaxed, especially in states that permit cities greater autonomy through home-rule provisions, but the powers of local government con- tinue to derive directly from the actions of the state.

There are various mechanisms involved in the relationship between the federal govern- ment and the states and between the states and localities. Preemptions involve the federal government preempting state action traditionally associated with the lower level of govern- ment. For example, the federal Nutrition Labeling and Education Act of 1990 preempted many state and local laws regarding food labeling. Such assumptions of power have been particularly signifi cant in the last few years. For example, federal preemptions of state and local authority more than doubled after 1970. More than 50 percent of the preemption statutes enacted in the entire history of our country were enacted in the last twenty years. Not even Ronald Reagan, despite his rhetoric promising a return of more power to the states, was exempt from this trend, endorsing federal limits on the regulation of business, as well as restraints in health and the environment (Kincaid 1990, p. 149).

Mandates The New York and Printz cases deal with what are called direct orders, require- ments or restrictions enforced by one government upon another (the federal government on states and localities, the states on the cities). Direct orders might include a federal

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requirement that cities meet certain clean water standards or a state requirement that a city pay part of the costs of certain welfare programs. Another way control can be exercised over another government is through conditions tied to grants-in-aid. These conditions are typically of the type parents use with children: “You can go outside to play after you have cleaned your room.” Conditions of aid might require land-use planning or an assurance of making facilities accessible to the handicapped prior to a capital construction project.

Because cities derive their powers from the states, most state requirements are direct orders. But most federal requirements are conditions-of-aid tied to a particular grant pro- gram. “Conditions-of-aid” are of two varieties. Cross-cutting requirements are rules that apply to most, if not all, grant programs. For instance, the federal government requires environmental impact statements before undertaking capital projects, certain personnel provisions in agencies receiving grant funds, and compliance with civil rights legislation. Other conditions-of-aid are program-specifi c, applicable only to the particular program. They may include rules about program planning, implementation, and evaluation. For example, a particular program might prescribe certain maximum salaries for individuals employed under the grant or some form of citizen participation in program design (most federal programs have this latter requirement).

Congress imposes such conditions-of-aid requirements under the Spending Clause of the Constitution. For the terms to be valid, though, federal lawmakers must clearly state the conditions in the legislation, making certain that state and local governments are aware of the requirements. The legality of Congress using funding conditions as a way of advanc- ing regulatory and administrative objectives has been reaffi rmed in several Supreme Court decisions, notably Cedar Rapids Community School District v. Garret (1999) and Davis v. Monroe County Board of Education (1999) (see Box 3.3).

The term mandate has been used to embrace both conditions-of-aid and direct orders, in either case an order requiring a government to do something it might not otherwise do. And mandates often require states or localities to spend money they would not otherwise spend. Today it is estimated that federal mandates cost state and local governments an estimated $100 billion a year. State spending mandated by the recent immigration bills alone is estimated to be over $1 billion. Moreover, states and cities claim that mandates unduly impinge upon the autonomy of their level of government. Consequently, man- dates have become a source of considerable frustration for those on the receiving end. The argument continues today by mayors and governors across the country—the mayors concerned with both federal and state mandates, and the governors concerned primarily with federal mandates.

You are in charge of a coalition combating domestic violence. The various nonprofi t organizations that are the primary service delivery groups in this area have complained to you that a new state initiative to stop human traffi cking will have the effect of reducing their capacity to help current victims of domestic violence and abuse. What would you do?

What Would You Do?

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For nonprofi ts, mandates tend to be a part of daily life. The key difference is that where a local government may have mandates from a relatively narrow number of sources, such as the federal and state levels, a nonprofi t agency often will face direct orders or conditions- of-aid requirements from each of its funding sources, and the larger the funder (and funding amount), the greater the burden. Those in the nonprofi t sector sometimes speak of mandates as the “golden handcuffs”—the funding is great, but grant maker demands usually place an excessive administrative strain on the organization. As Paul Light concluded, the situation has been exacerbated in recent years by trends in nonprofi t management reform: “Unfortu- nately, the nonprofi t sector is caught in the middle of an unrelenting contest between com- peting philosophies and advocates of reform, all of which produce signifi cant motion back and forth across different reform ideologies” (Light 2000, p. 45). The varying philosophi- cal positions can become manifested in an array of reporting standards and administrative procedures imposed by grant-makers.

The United Way of America, for example, plays a leading role in establishing guide- lines for performance (or “outcome”) management by nonprofi t organizations, and an increasing number of local United Ways have set reporting standards for agencies receiv- ing grants. Similarly, many foundations (large and small) have made interagency partner- ships an eligibility requirement for grant programs. If a nonprofi t service provider wants to apply for a grant, the leadership must show how the agency will “collaborate” with other nonprofi ts, government, and even for-profi t fi rms.

At the federal level, every president since Nixon has pledged to reduce the burden of mandates on states and local governments. In his 1992 State of the Union address, President Bush said, “We must put an end to unfi nanced Federal Government mandates. . . If Congress passes a mandate, it should be forced to pay for it and to balance the cost with savings else- where. After all, a mandate just increases someone else’s burden, and that means higher taxes at the state and local level” (Bowman & Pagano 1992, p. 4). However, shortly after the presi- dent made his remarks, he signed a budget agreement that contained twenty new mandates expected to cost state and local governments about $17 billion over the next fi ve years.

An important step forward was taken in March 1995, when President Clinton signed the Unfunded Mandate Reform Act (UMRA) of 1995, presumably an effort to limit the effects of federally imposed mandates. Although this legislation does not provide federal funding for all mandated activities, it does require that Congress recognize the implica- tions of mandates for state and local activities and, in some cases, authorize funding for such mandates. According to Gullo (2004) UMRA increased the amount of information that federal agencies are required to provide Congress when proposing a bill that will impose costs for the state, local, and tribal governments. UMRA also gives Congress the authority to defeat or alter a bill that would impose costs for the state, local, and tribal governments above the 1996 threshold of $50 million (Gullo 2004).

However, there seem to be a variety of “loopholes” through which Congress might avoid funding. Although most state and local government associations (such as the Big Seven Public Interest Groups) actively supported the act, most also realize that it provides limited relief from federally imposed mandates. Also, the act does nothing about mandates imposed on local governments by state governments.

And, according to many, unfounded mandates continue. For example, the Bush adminis- tration has received criticism from educational groups as well as state and local offi cials for

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the presumedly unfounded mandates required by the No Child Left Behind Act. Accord- ing to the National Education Association (NEA), “Since the law’s enactment in 2002, there has been a $27 billion funding shortfall in what Congress was supposed to provide schools to meet the law’s regulations and what has been funded. Cost studies in Ohio and Texas estimate that the price of the regulations to state taxpayers could run as high as $1.5 and $1.2 billion, respectively” (www.nea.org/lawsuit/nr050420.html). For this reason, the NEA and others fi led a national lawsuit seeking remedy from this unfunded mandate.

Subnational Relationships

Even focusing on state and local activities, we fi nd the federal government involved in some way—at a minimum, in providing funds for states and localities. But important intergovernmental activity also occurs at the subnational level: state to state, state to local, and local to local.

State to State Relationships between and among states are mentioned several times in the U.S. Constitution, most notably in the requirement that states recognize the rights and privileges of citizens of other states and give “full faith and credit” to the public acts and legal proceedings of other states. Some of the most important intergovernmental relation- ships involving various state governments are not based in constitutional doctrine, how- ever, but are rather the result of political practices over the years.

Relationships among states are not without confl ict. States may differ over census counts (important in determining the number of representatives in Congress), shifting state boundaries (as when a river changes course), and a variety of substantive policy issues (such as the rights to underground water or the degree to which dumping pollutants into a river affects water quality in states downstream). In addition, states must increasingly compete with one another for economic development; for example, when General Motors announced plans to build a plant to produce the Saturn, many states entered an intense bidding war, each hoping GM would locate the plant within its boundaries.

States also cooperate. There are many opportunities for offi cials in one state to seek the advice of those in other states with respect to policy alternatives or new administra- tive arrangements. Many organizations, including the Council of State Governments, the National Governor’s Association, the National Council of State Legislators, and groups that bring together state offi cials in personnel, budgeting, purchasing, social welfare, health, and so forth, have been created to help offi cials share information and expertise. These groups, along with the Washington offi ces of various states, constitute an important lobbying group in Washington.

One way the states come together to resolve potential disputes or work together on common problems is through interstate compacts. These agreements have historically been bilateral, involving only two states; however, increasingly, they involve a number of states within a region or even all 50 states. Originally used to resolve boundary disputes, inter- state compacts today cover a wide variety of topics, most arising from the fact that today’s policy problems do not confi ne themselves neatly to the borders of one state. Imagine, for example, the common interests of people in several states sharing the same underground water supply. Think also of the problems that are of interest to all who live in metropolitan

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areas, such as Cincinnati or Kansas City, that cross the boundaries of two or even more states. It is not uncommon in such areas to fi nd interstate compacts covering air and water pollution, transportation, law enforcement, and so on.

States may also use interstate compacts to symbolize their agreement to cooperate in especially important policy areas. For example, Arizona, California, and Nevada have a defi nite interest in ensuring access to water from the Colorado River. The states’ govern- ments follow compacts dating back to 1922, which lay out strict guidelines on access rights and water usage. In cases such as this, an interstate compact provides a way for states to formalize resolution of a dispute or to work together without involving the fed- eral government.

State to Local We have seen that the relationship between states and localities is unitary— that is, local governments have only those powers granted by the state. However, the nature of the powers may vary considerably. Most cities operate under some form of charter, the local government equivalent of a constitution. But a state may grant charters in several ways. Some states develop special charters for each individual local government; others take exactly the opposite approach and grant a general charter for local government. The classifi ed charter approach seeks to avoid the restrictive nature of the special charter and the rigidity of the general charter by granting charters to various classes of cities. For exam- ple, all cities over 1 million in population might be designated Class A and have one set of charter provisions, whereas cities from 250,000 to 1 million might be Class B and have a different set of provisions. A fi nal means of chartering cities, called home rule, permits cit- ies to write their own charters, within very broad state guidelines and generally subject to voter approval.

Home rule obviously provides the greatest fl exibility for local governments in terms of basic structure; however, even under home rule, there is substantial state involvement in local government affairs. For one thing, the states are an important source of funding for local activities. Indeed, at a time when federal aid has leveled somewhat, state aid to local governments has increased dramatically. Between 1980 and 2004, for example, state aid to local governments increased from about $83 billion to over $379 billion in 2004, with most of that targeted for education and lesser amounts for welfare, highways, and other purposes (US Census, www.census.gov/govs/www/estimate.html).

But states do not only provide money; they also regulate local government activities. State governments tell local governments what taxes they can levy, what services they can provide, and what types of management systems they must employ. In doing so, states pro-

The Development of Intergovernmental Relations 1 0 7

You are city manager for a medium-sized community in the Northwest. The state legislature is considering a bill intended to prevent underage drinking. It would require local police departments in the state to perform additional spot inspections of bars and restaurants serving alcohol after midnight. Although you think the cause is an important one, you simply don’t have the resources in your police department to do this. The state is not willing to provide more money. What would you do?

What Would You Do?

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vide needed uniformity, as in the case of highway signs, and ensure minimum standards of performance, as in education or welfare programs. Because states have virtually unlimited power over local governments, there is an obvious temptation to compel local govern- ments to assume new responsibilities. In most states, there are twenty to thirty statutes that impose substantial fi nancial burdens on local governments. The total number of man- dates or regulations may number in the thousands (Berman 1992, p. 53).

Just as states complain about federal mandates, many local offi cials view state mandates as unnecessary intrusions on local prerogatives. The mandates may require local expen- ditures that might not otherwise be made. Recently, localities have complained especially about sneaky mandates, actions that are required of local governments by the inaction of state governments. For example, Georgia failed to pick up prisoners housed “temporarily” in county jails, resulting in overcrowding in the prison system, to say nothing of the additional fi nancial burden on the counties. There is, however, new sympathy for localities in terms of mandates, and about one-third of the states now have requirements for at least partial reim- bursements of expenses created by mandates (MacManus 1992).

Localities are not powerless in their relationship with the states, especially as they consti- tute an important base of political support for those in the legislatures. Local representatives and senators can and often do voice the local message loudly and clearly in the state legisla- ture. Moreover, various patterns of state/local cooperation have emerged in the past several years. Many states, for example, have developed state-level equivalents of the federal Advi- sory Commission on Intergovernmental Relations. These state commissions bring together state and local offi cials to discuss problems in the intergovernmental system and devise ways to work together more effectively. Among the recommendations that have emerged are sug- gestions for greater local discretionary authority and for reductions in the number of state mandates.

Local to Local In discussions of intergovernmental relations, there is an understandable tendency to focus on national patterns, but for those who work at the local level, relation- ships with other local governments are extremely important. One reason is that many citizens live in one jurisdiction, work in another, shop in another, and pay taxes to several. They naturally expect services, such as quality streets or law enforcement, to remain fairly constant as they move from one place to another.

From a political standpoint, the fragmentation of government, especially in urban areas, often means that problems are separated from the resources that might be employed to solve them. Wealthier cities have the money; poorer cities have the problems. But even where resources are evenly distributed, it is diffi cult to get several local governments together to resolve common problems. In such cases, citizens often turn to higher-level governments for help, thus taking the problem (and its solution) out of the hands of local authorities (Nice 1987, p. 191).

But many inter-local problems are resolved at the local level. Natural, though informal, patterns of cooperation develop, especially in the relationships among local profession- als. The police chief in one community talks with other police chiefs, the health offi cer talks with other health offi cers, and so on. More formally, one government may actually purchase services from another, contracting for police or fi re protection, wastewater treat- ment, or trash collection. Los Angeles County, for example, provides a variety of services to

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local governments through contract arrangements. Additionally, Councils of Government (COGs), oversight bodies representing various localities, may be created to help coordinate local affairs.

In recent years, partnerships between local governments have entered the information age as many cities and counties started to share technological innovations across jurisdic- tions. In the city of Sunnyvale, California, for example, the local government worked with other municipalities and the Microsoft Corporation to develop online permitting software. The Silicon Valley Smart Permit initiative proved to be so successful, Sunnyvale has cre- ated a public-private partnership with a management fi rm and its e-government affi liate to market the application to other local authorities that are interested in enhancing their effi ciency and responsiveness (Hernandez 2001; Mariani 2001).

Finally, special districts may be created to solve problems that cross governmental bound- aries. As mentioned, special districts are local governments created for a specifi c purpose within a specifi c area (not necessarily coinciding with the boundaries of a city or county). Although special districts may promote coordination of health, education, or other services, they also add to the number of governments within a particular area. Thus, one city block may be governed by the city, a county, and several special districts. A resident may have dif- fi culty fi guring out which government can help with a particular problem. The diffi culties in coordinating efforts are substantial, as are the problems of holding the various govern- ments accountable.

■ Working with Nongovernmental Or ganizations

It is impossible to speak of intergovernmental relations without discussing the role of non- governmental organizations (NGOs) in the policy process. Nonprofi t, for-profi t, and faith- based organizations have taken a leading role in the delivery of public services. NGOs can be found at all levels of governance and in a variety of policy areas. However, NGOs must be considered not only for their part in implementing public programs, but also their growing infl uence in raising issues to the public agenda, lobbying for particular policy alternatives, and guiding political and administrative decision making. In many respects, even the term “intergovernmental relations” seems a bit outdated; perhaps we should opt for the more inclusive term interorganizational relations.

The use of NGOs in the delivery of public services has grown markedly in the last several years. Figure 3.3 compares, at the federal level, civilian employment and overall governmental expenditures. Between 1970 and 2004, government spending increased by over 400 percent, even holding infl ation constant, but government employment grew only about 25 percent, with practically no signifi cant growth in the last twenty-fi ve years. This substantial growth in federal programs, occurring without comparable growth in federal employment, is explained by the fact that parties other than the federal government are actually conducting the programs and delivering the services. Federal money, for example, goes to private fi rms, such as defense contractors or banks that administer school loan programs, and to nonprofi t organizations, especially those that provide human services such as care for the homeless or disabled.

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FIGURE 3.3

Federal Spending and Payroll, 1970–2000 (in Billions of Dollars)

195.6

590.9

1,789.2

2,293.0

1,253.1

27.3 58.0

99.1 130.8 166.9

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

1,800.0

2,000.0

2,200.0

2,400.0

2,600.0

1970 1980 1990 2000 2004

Federal Spending

Payroll

SOURCE (numbers): http://www.whitehouse.gov/omb/budget/fy2008/pdf/hist.pdf https://www.opm. gov/feddata/factbook/2005/factbook2005.pdf, (p.62)and https://www.opm.gov/feddata/factbook/2005/ factbook2005.pdf, (p.62).

Much of the attention on NGOs tends to focus on the nonprofi t sector, which we will discuss later in this chapter, but for-profi ts also deserve attention. Traditionally, business was seen as the antithesis to government, with clear boundaries between the public and private sectors. Today, we have experienced a signifi cant blurring between sector lines, with only vague distinctions between for-profi t fi rms and government agencies. Such involvement of private-sector fi rms in public programs, of course, isn’t completely new. Defense and aerospace companies have contracted with government for decades, and for- profi t prisons were actually the norm in the nineteenth century. In fact, many of our tech- nological innovations stem from public-private partnerships. Increasingly, though, these partnerships can be found in areas once viewed as purely public in nature, including health and human services, trash collection, education, environmental protection, and parks and recreation (Rosenau 2000; Sagawa & Segal 2000).

Governments have entered into public-private partnerships to conserve revenues, to reduce crime in blighted areas, and to promote economic growth. We mentioned previ- ously the partnership between Sunnyvale, California, and other municipalities with the Microsoft Corporation to create online permitting software. Other examples include an alliance between the city of Daytona Beach, Florida, and a private development fi rm to renovate a dilapidated boardwalk and build a beachfront hotel; a partnership between the state of Michigan and other states for correctional services; and relationships across the country between school districts and private computer fi rms to bring public school class- rooms into the information age. In each case, the interorganizational relationships that arise are important to the success or failure of public programs.

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Privatization and Contracting

The movement toward greater involvement of NGOs in the delivery of public services is partly ideological. Some people simply feel that services should be provided by those outside government wherever possible. But the movement has also been stimulated by recent restrictions on government spending and a resulting effort to fi nd more effi cient ways to conduct the public’s business. Both motives have been discussed under the head- ing privatization—the use of NGOs to provide goods or services previously provided by government. It is important to be clear about its various meanings because the term is used several different ways (Kolderie 1986).

In its broader sense, privatization refers to efforts to remove government from any involvement in either the design or conduct of a particular service. In Great Britain, for example, major industries such as steel or coal, once nationalized, are returning to private control, typically through direct sales to individuals, fi rms, or other groups. In the United States, most such major industries, including most utilities, are already in private hands, so there are relatively few examples of such magnitude (the sale of Conrail and certain petro- leum reserves are exceptions). There are many more limited examples of privatization, however; a city might, for example, sell a golf course to a country club development, thus ending the government’s involvement in golf.

The rationale for removing government from a particular area varies. In some cases, peo- ple may feel that clients will receive more personal attention from a nongovernmental or private group, such as one that operates a drug abuse program or a day-care center. Others suggest that privatization enhances competition among service providers, thus ensuring that the new means of delivering services will provide higher quality at a lower cost to the client. Programs also can be turned over to the private sector because the programs seem inappropriate to government or because the private fi rm operates more effi ciently.

To trace some innovative practices in government, check out the Alliance for Innovation at http://transformgov.org and the Ash Institute for Democratic Governance and Innovation at Harvard University’s Kennedy School of Government program at www.ashinstitute.harvard. edu/Ash/index.htm. For innovations in nonprofi t organizations, see the Leader to Leader Institute at www.pfdf.org.

NETWORKING

Privatization is used in a more narrow sense (and more frequently) to refer to various devices through which a government retains a policy role regarding a particular service but engages someone else to actually deliver the service. A federal agency might decide to contract with a private fi rm rather than handle computer programming itself; a state might contract with a nonprofi t organization to deliver services to welfare recipients; or a local government might lease a public hospital to a private fi rm. In each case, the services would be spelled out in detail by the government and some, if not all, funding might be provided, but day-to-day operation of the program would be the responsibility of the for-profi t or nonprofi t agency.

Working with Nongovernmental Organizations 1 1 1

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During the past decade, government at all levels has explored a variety of mechanisms for privatizing public services, the most popular being the use of contracting (see Box 3.4). Supporters view fee-for-service and similar arrangements with NGOs as a more effi cient method of service delivery, given the greater fl exibility, different labor costs, and econo- mies of scale offered by for-profi t and nonprofi t organizations. Some of the most publi- cized examples of contracting in recent years have been in human services, because the federal government shifted to state and local authorities (and in turn to NGOs) a larger role in the nation’s welfare system under the Personal Responsibility and Work Opportu- nity Reconciliation Act of 1996.

In the city of West Palm Beach, Florida, the local Work and Gain Economic Self-suf- fi ciency (WAGES) board, the public-private partnership that oversees implementation of welfare reform in regions statewide, invested $6.2 million on welfare-to-work programs in fi scal year 1998–1999. The WAGES Board contracted with Lockheed Martin IMS, a sub- sidiary of the aviation-aerospace giant, to run the programs, and in a short period reduced the number of welfare cases by 45 percent. Advocates say the for-profi t fi rm was able to be more innovative than government agencies in its hiring and development of service sys- tems, and in the future the WAGES Board intends to examine ways to use privatization to streamline even the determination of program eligibility (Walters 2000, pp. 34–35).

The state of Kansas used contracts to hand over most of its child welfare services to the private sector. Several years ago, government offi cials recognized that the state’s foster care, adoption, and related programs simply had to change. “We had a failed child welfare system in this state,” said State Rep. Melvin Neufeld, who played a key part in drafting the reform legislation. Excessive costs and declining effectiveness on the part of government agencies,

BOX 3.4

TAKING CONTRACTING SERIOUSLY

A government that took contract management seriously would • Regard resources required to manage contracts as part of the cost of contracting, funded

from cost savings and performance improvements they are likely to produce. • Train contracting people, especially those developing contract requirements and doing

contract management, in selection and use of performance measures for contracts. • Take evaluation of contractor past performance seriously, as a method for incentivizing

good performance, particularly for complex “relational” contracts where there is a danger the contractor will exploit the government post-award.

• Look for ways to hire relatively young “doers” (such as software programmers, bench engineers) from industry to do stints as contract managers, to give government the technical expertise to manage technical contracts in situations where the government has few “doers” itself.

• Reconceptualize—in terms of training and self-image—contract management as a high- level management job.

SOURCE: Steven Kelman, “Refl ections on 21st Century Government Management,” IBM Center for The Business of Government (2008 Presidential Transition Series), “What Might the Next Decade’s Trends Be” (If We Get to Focus on Performance)?, p. 45, www.businessofgovernment.org/pdfs/KettlKelmanReport.pdf.

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coupled with newly elected conservative state leadership, prompted state offi cials to shift virtually the entire system of service delivery over to NGOs, mostly for-profi t fi rms. Under the new system, state government contracts with lead agencies at a regional level, which in turn subcontract with NGOs to handle actual service delivery. State offi cials act mainly to administer the contracts and ensure standards for service quality (Gurwitt 2000, p. 40).

As these cases may suggest, privatization has transformed public welfare into a major growth industry. Maximus, Lockheed Martin IMS, and other for-profi t corporations have capitalized on the new arrangements to expand their business operations. The Lockheed Martin IMS story is particularly interesting because it also refl ects changing priorities in public policy in the aftermath of the cold war. As the number of defense contracts dwin- dled during the 1980s and 1990s, Lockheed Martin IMS picked up the slack in its parent company’s defense-related operations by contracting for delivery and administration of welfare services. The strategy has proven to be quite a success. Lockheed Martin IMS has experienced a signifi cant jump in the number of government clients, from 0 to 25, since the passage of welfare reform in 1996.

But privatization of human services has its challenges. Even as supporters point to Kansas and Florida as success stories, a closer look reveals major problems relating to sustainabil- ity. Next door to its thriving effort in West Palm Beach, Lockheed Martin IMS struggled in Miami-Dade County. The company’s costs exceeded $38 million in the same fi scal year, but failed to make a signifi cant impact on caseloads. In fact, the county government has since handed the contract for welfare-to-work services over to a local community college (Walters 2000, p. 35).

In Kansas, the state’s transformation of child and family services has come under attack not only from liberal critics, who argue that public welfare should not be left up to fi rms whose primary motive is profi t, but also from the businesses themselves. Governing maga- zine reported that “Kansas’s story isn’t really about privatization: It’s about a rushed, no- holds-barred effort to build a public-private social services system using managed-care principles, as well as its struggle to recover from the fallout” (Gurwitt 2000, p. 40). What was the fallout? State offi cials have been forced to pick up the pieces from what can only be considered a managed-care revolution. Unlike other states, Kansas bypassed smaller scale, experimental initiatives, choosing instead sweeping reforms. The change inside the state resulted in confusion, as state offi cials struggled to learn new roles as contract man- agers rather than caregivers. For private fi rms, the reforms opened a fl oodgate on newly created service networks, swamping many businesses that simply did not have the exper- tise or capacity to deal with the demands of public welfare programs.

Contracts used to provide public services certainly have promise; however, as the Kansas example has shown, building effective alliances with NGOs must not be taken for granted. Nor should contracts be seen as the only mechanism. There are a variety of options for partnering with NGOs. A franchise can be awarded to a private fi rm to perform a certain service within a state or locality. The fi rm charges citizens directly for the services it pro- vides. Typically, rates and performance standards are established by the government, and there is often some continuing regulation of the fi rm. Examples include electric power, taxi services, cable television, and emergency ambulance services. Similarly, governments may provide grants or subsidies to private or nonprofi t organizations that are performing needed public services. The government provides full or partial support for activities that

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will benefi t the community but that the local government, for fi nancial or other reasons, does not wish to operate on its own. Examples include local government support for the arts, child care, or shelter for the homeless.

All levels of government have experimented with the use of vouchers, which are cou- pons citizens redeem for goods or services. The federal food stamp program, for example, provides recipients with vouchers to purchase food, but it permits the individual to choose both the supplier and the items to be purchased (within stated limits).

At the local level, many jurisdictions have explored the use of vouchers for education. But although proponents suggest it would lead to more effective, effi cient options than the public schools, the issue has become one of the most controversial topics in current educa- tion policy.

Increased privatization means that public offi cials need to be attentive to the process of contracting for services. In the words of Ruben Berrios (2006), “The government pur- chases the expertise of private fi rms to provide services. The goal is to create a more effec- tive and effi cient delivery through a system that fosters and creates competition, provides better management, and helps reduce the size of the government” (p.119). Although gov- ernment contracts are not new, they create the new relations between government orga- nizations and private or nonprofi t organizations. Cooper (2003) describes a shift from the traditional authority-based relations (vertical model) as in regulatory enforcement to negotiation relations (horizontal model) in today’s public contract relationships.

The vertical model is about authority relationships: the way that decisions get from the democratically appointed executives and down through agencies to the contracting offi cer who is ultimately authorized to negotiate for the needs of the community and then to com- mit its resources in a legally binding relationship . . . . The second model comes into play once the decision to contract for goods or services has been made and operates in tandem with the vertical model . . . contractual relationships are horizontal in character and oper- ate from the base of mutual commitment in which, theoretically at least, the parties are equal. (Cooper 2003, p. 48).

Recent trends with government contracting refer to so-called public/private partner- ships, where the term “partnership” indicates more than cooperation. These partnerships may include long-term agreements for activities that are inherently considered govern- mental, such as commercial operation of prisons, or including contractors in rule-making policy procedures (Cooper 2003, p. 57). Public/private partnerships and alliances operate between government agencies and for-profi t companies and between government agencies and nonprofi t organizations. Nonprofi t organizations are a convenient choice for govern- ments for at least two reasons: they are often fervently committed to providing assistance for people in need, and they have close relations with the communities. In addition, vol- unteers in these organizations often deliver public services for lower costs than if these services were provided by government agencies. However, government grants to nonprofi t organizations impose additional administrative requirements for these organizations, fre- quently requiring more resources and paid personnel.

While public/private partnerships and alliances may provide better services for lower costs, they present a huge challenge for government offi cials. When entering a partner- ship with a for-profi t company, public managers should be aware that these companies operate for making profi t. “Whatever else is promised, the most common way in which for-profi t fi rms seek to make money on government contracts for the same amount of

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money government is spending now to do the job itself, is to reduce personnel costs” (Cooper 2003, p. 63). There are also moral issues related to government contracting. Berrios (2006) talks about some fl aws that complement the contracting process: favoritism for companies that already have contracts with the government, preferences for large fi rms over small fi rms, and corrupt behavior of the government offi cials that in some instances grant contracts to private companies without following legal requirements. Finally, where government programs are run directly by government, responsibility for their success lies squarely with the government agency. But where such programs are actually delivered by those in the private or nonprofi t sector, traditional mechanisms for control and account- ability may not work. Maintaining a proper concern for democratic values such as equity and responsiveness may, in the long run, prove more diffi cult than the managerial chal- lenges of creating appropriate interorganizational policy networks.

■ The Management of Nonprofit Or ganizations

As we have seen, nongovernmental organizations have become important players in public policy and administration. Unfortunately, many public administrators fail to appreciate the distinct challenges faced by these organizations, especially in the nonprofi t sector. In order to develop more effective interorganizational, cross-sector relations, it may be help- ful to identify some of the key elements of organizational capacity within nonprofi ts.

Operational Leadership

Nonprofi t management begins with effective leadership. By leadership, we mean an organi- zation’s internal systems for establishing a mission and vision to guide organizational action, for engaging in strategy-making and planning as a way of setting goals and objectives, and for developing an operational structure to facilitate the translation of strategy into action.

Creating effective leadership systems in nonprofi ts starts with forging a sound mission and vision. The mission represents the purpose the organization will serve in its commu- nity. This vision is the guiding image of what members want the organization to become in the future (Bryson 1995; Smith, Bucklin & Associates 2000). Although these factors are critical in virtually all organizations, they are especially important in nonprofi ts. Indepen- dent sector groups depend on a lot more than paid staff to carry out organizational objec- tives, including volunteers, donors, board members, and other resources. Without a strong sense of purpose, or a clear vision for the future, nonprofi t leaders will fi nd it extremely diffi cult to build the “critical mass” necessary for success.

Of course, setting a mission and vision must be combined with sound planning—in par- ticular, establishing clear, measurable goals and objectives. A recent survey of nonprofi ts found that the “level of support and commitment to planning by the leadership of the orga- nization is . . . a crucial element in an assessment of organizational capacity. If management neither plans nor possesses the support systems needed to enable planning (such as budget- ing systems, planning models, information about past organizational experiences), then the issue of capacity is largely moot. Organizational survival generally requires planning and the development of a shared vision and goals” (Fredericksen & London 2000, pp. 234–235).

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Leadership also involves building a solid organizational foundation that allows non- profi ts to transform their strategy into action. For those working in the charitable sector, this often proves to be the most diffi cult task. Most nonprofi ts begin with an idea, which translates very well into mission and vision. Things get much tougher, though, in trying to turn the idea into an organizational reality.

In fact, one of the biggest challenges confronting today’s nonprofi ts involves creat- ing effective, high-capacity systems of operation. Much of this stems from an unwill- ingness on the part of government and foundation grant-makers to provide funding for administrative costs. Nonprofi t agencies could gain access to resources for programming and service delivery, but they struggled to fi nd support for the basics of management: staff, equipment, technology, and related expenses. Fortunately, foundations have begun to realize that although restricting funding to program-related needs sounds good, it’s impossible to deliver quality services without a well-developed administrative structure (Greene 2001).

Resource Development

Speaking of fi nancial support, resource development represents another key element of nonprofi t management. Agencies in the independent sector receive their funding from a variety of sources, including fees and charges, government grants-in-aid, and private giving. According to the National Center for Charitable Statistics, of some 1.4 million nonprofi t organizations registered with IRS, nearly half have collected more than $25,000 in gross receipts. They reported more than $299 billion in revenues in charitable contribu- tions during 2004, with 83 percent from individual contributions, 11 percent from private foundations, and 5 percent from corporations (The Nonprofi t Sector in Brief—Facts and Figures from the Nonprofi t Almanac 2007 . . . Center on Nonprofi ts and Philanthropy at the Urban Institute, p.5, www.urban.org/UploadedPDF/311373_nonprofi t_sector.pdf).

These fi gures don’t include funding from fees and government grants, which make up an additional $400 billion. With such a diverse revenue base, it might seem strange that a primary weakness of nonprofi ts (especially the smaller organizations) is to rely on a single source of support, and not look beyond the next grant cycle for their funding. Successful nonprofi ts, on the other hand, diversify their revenue streams, balancing between grants, fees-for-service, and other sources.

To explore some of the aspects of nonprofi t management, go to the Aspen Institute at www. aspeninstitute.org; the Hauser Center for Nonprofi t Organizations at Harvard University at www.ksghauser.harvard.edu; and the Institute for Not-for-Profi t Management at Columbia University at www.gsb.columbia.edu/execed/inm/index.cfm. See Chapter 2 for a list of sites relating to the advocacy role of nonprofi t organizations.

NETWORKING

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Nonprofi t organizations that are classifi ed as either a public charity or private founda- tion under IRC 501(c)(3) benefi t from their tax-exempt status, which allows taxpayers to deduct contributions as charitable donations. Some nonprofi ts also may receive discounts on postal rates, special provisions for fi nancing, as well as various exemptions from state and local taxes.

To assure sustainability, many nonprofi ts and their associations have developed innova- tive strategies for maintaining a sound fi nancial base for the next generation. For example, the National Committee on Planned Giving has initiated the Leave a Legacy program, a nationwide effort to encourage people of all socioeconomic groups to include chari- table contributions as part of their estates. The program in large part aims at attracting charitable contributions from the “baby-boomer” generation, which over the next few decades will retire with unprecedented wealth. An important element of Leave a Legacy is its community-based focus—that is, a single organization cannot adopt the program, but instead the program brings together nonprofi ts from around a given community. Prospec- tive donors are asked to work directly with the planned giving offi cers of the foundations or with estate planners to decide upon a charitable benefi ciary.

As any nonprofi t manager will tell you, resource development goes well beyond grants and other types of fi nancial contributions. Although most people recognize the challenge nonprofi ts face in competing for donors, few appreciate the level of competition for other vital resources, such as in-kind support and volunteerism. Although charitable giving cer- tainly remains central to a nonprofi t organization’s balance sheet, more and more non- profi ts depend on in-kind contributions and the time, energy, and expertise of volunteers to meet their objectives. A study conducted by the Independent Sector found that while charitable giving by individuals had declined in recent years, more Americans were volun- teering than ever before. In 2004, about 65 million volunteered in charitable organizations (http://www.urban.org/UploadedPDF/311373_nonprofi t_sector.pdf).

Keys for successful resource development include being able to articulate a case for your organization, exploring a diverse array of support, identifying an appropriate development strategy and action plan, and ensuring effective implementation of the action plan. Most importantly, at the heart of the resource development strategy must be a commitment to building and maintaining relationships with funders, donors, and volunteers (Smith, Bucklin & Associates 2000).

Financial Management

Running a nonprofi t also depends on sound fi nancial management. The benefi ts of being a charitable organization were discussed previously, but with these benefi ts come important requirements for accounting and public disclosure of fi nancial transactions. For exam- ple, all 501(c)(3) organizations must maintain open records and prepare fi nancial reports for their stakeholders on a periodic basis. Many foundations and other grant makers ask grant recipients to undergo periodic audits, sometimes as an eligibility requirement. And charitable organizations with annual gross receipts of $25,000 or more must submit to the IRS each year a Form 990 (Return of Organizations Exempt from Income Tax), as well as fi le disclosure statements with state and local tax authorities.

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To satisfy these requirements, nonprofi ts must maintain detailed fi nancial records. At the very least, this includes following basic accounting standards and procedures. But fi nancial management includes much more than reporting. It should be at the heart of a nonprofi t’s strategic planning and management. Without the ability to generate clear, meaningful fi nancial information, and incorporate this information into organizational decision making, a nonprofi t agency limits its overall capacity. Unfortunately, many non- profi ts fail to follow established procedures, and some do not have in place even the sim- plest mechanisms for accounting. Small- to medium-sized nonprofi ts have the greatest need in this area.

The basics of fi nancial management include monitoring the assets, liabilities, and net assets of the organization, as well as the revenues and expenses for established reporting periods. Moreover, nonprofi t managers should make sure that the budget and fi nancial management process is undertaken in coordination with the governing board. In many cases, such coordination is mandated in the articles of incorporation, but it also makes sense to have those responsible for setting the strategic direction informed on the organi- zation’s fi nancial condition.

Board Governance

Most of the principles of nonprofi t management discussed here have focused on the opera- tional side of the organization. However, independent-sector agencies also must have an effective governance system. Nonprofi t boards are, in some respects, even more vital to the organization than to the staff, because some smaller agencies rely on board members for performing day-to-day tasks. Regardless of an agency’s size, its board represents the fi nal decision-making body of the organization. By law, board members are bound (in the articles of incorporation) to ensure the fi scal and legal health of the agency.

The board is responsible for several important roles. These include setting the strategic direction for the organization, serving as champions in the external community, and over- seeing organizational planning and implementation (Carver 1996). First, with regard to strategic direction, board members act as the primary source of vision, mission, and values for the agency. They ensure that these strategic factors become refl ected in organizational action. An excellent example of this can be seen in Porter Hills Retirement Communities and Services, a nonprofi t health-care provider in Grand Rapids, Michigan. The Executive Leadership Team at Porter Hills actually brings the outline of the Porter Hills mission, vision, and values into its strategy sessions and considers these principles prior to moving ahead on decisions. If a new venture, partnership, or internal change does not refl ect the core principles of the organization, or doesn’t coincide with where the board wants to be in the future, then the issue is either dropped or taken back to the board for direction.

Second, board members also must be the organization’s champions in the community. They are the principal spokespeople, representing the organization on key issues, but also the role models for donations and volunteerism. In this capacity, the board should set the policies and procedures for the operational staff and leadership on strategies for external communication. Board members, consequently, must always be kept “in the loop” on fac- tors affecting the organization.

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A vital point here is that the board must speak with one voice, or it shouldn’t speak at all. This means that board members should support decisions of the governance body once a consensus has been achieved. Too often, and particularly with smaller, community-based organizations, members of nonprofi t boards go into the community and speak against other members or against the organization. This does nothing but send a signal to those listening that the disgruntled board member has failed to appreciate the core values of governance.

Third, the board must support the organization’s leadership on issues of planning and implementation. The board should make sure that the organization has an effective and ongoing planning process and work with staff to establish priorities and goals. This doesn’t mean that board members should try to manage day-to-day activities on the part of the staff. It does mean, though, that those on the operational side of the organization should coordinate and seek direction from the board on issues that are truly strategic in nature.

Nonprofi t boards vary in size with some organizations having fewer than ten, and others having more than fifty members (which is toward the extreme!). The composition of the board will refl ect the history and mission of the organization, but most nonprofi ts strive to ensure that the governance system will refl ect the diversity and values of the constituent community. Here are a few of the considerations relating to board size. • What functions are required of the board? • How many individuals, and in what roles, are needed to accomplish those functions? • How many board committees are needed to accomplish the organization’s goals? • Are there suffi cient individuals on the board to participate on board committees?

(Smith, Bucklin & Associates 2000, p. 29) A primary source of failure for nonprofi t boards relates to the leadership’s inability

to manage the board’s time wisely. Most often the greatest ineffi ciency happens at board meetings. How many hour-and-a-half meetings have turned into three-hour marathons? Agenda setting is a valuable beginning point, but also the presiding offi cer must set clear time constraints for each of the agenda items, making sure that everyone has the opportu- nity to participate when necessary but limiting comment to only the key points.

Boards are perhaps one of the most important attributes for effective nonprofi t man- agement. A high-impact board with an effective board chairperson can have an extraordi- nary infl uence on the organization’s success. Unfortunately, the opposite is also true. Many a good nonprofi t has been severely limited, and in some cases completely destroyed, due to an ineffective, divisive board.

Board-Staff Relations

Among the greatest challenges faced by nonprofi ts is the need to strike a balance in board staff relations. As the previous discussion suggested, board members have a central role to play in the organization’s strategy making and in representing the organization in the external community. However, once the parameters for action have been established, board members must step back and allow staff adequate room to achieve the goals and objectives. Frequently, boards (especially those consisting of inexperienced members) tend to micro- manage the operational staff. But this does little more than foster distrust and frustration, and, in many cases, it contributes to high staff turnover.

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There are several keys to effective relationships. First, the board must set clear expecta- tions for leadership and staff. At least once a year, board members should sit down with the executive director and lay out the goals and objectives for the coming term. Second, the expectations must be reinforced by lines of communication between board and staff. Communication channels should be maintained by the executive director, and in some rare events directly between the board and staff. Third, the board must reinforce success. As part of its oversight function, the governing board should be ready to celebrate the good work being done, not just sanction the shortcomings.

In many respects, the primary buffer between the board and staff is the executive direc- tor (ED). Although some EDs position themselves in ways that cut off the governance and operational sides of the agency, with very little direct involvement between board members and staff, this takes things a bit too far. The most effective relationships feature EDs as the main conduits or brokers. Staff should be present, when appropriate, at board meetings, mainly to offer expertise and inform the board on key decisions; similarly, the board must provide oversight and guidance to the staff on key issues of agency strategy. How far to go on either side will depend on the organization, but it’s up to the executive director and members of the leadership team to determine the appropriate balance.

Advocacy The advocacy role of independent-sector organizations is perhaps the most overlooked and misunderstood aspect of nonprofi t management. This stems from the fact that the federal tax code limits lobbying activities by charitable organizations and, depending on the party affi liation or political position, some legislators and policy mak- ers have frowned upon nonprofi t activism. But nonprofi t organizations may, even under federal tax law, engage in advocacy as a way of amplifying the voice of their constituents in the policy process.

In 1976, Congress granted nonprofi ts the right to lobby in the public interest without having to worry about losing their status as tax-exempt organizations (Pub. L. No. 94– 455, 1307 [1976]). While the IRS deliberated on the issue for more than a decade, in 1990 the federal tax code was revised to expand the advocacy rights of nonprofi ts. Under the 1976 tax law, nonprofi ts that choose to come under its jurisdiction must comply with the defi nition of lobbying as “the expenditure of money by the organization for the purpose of attempting to infl uence legislation. Where there is no expenditure by the organization for lobbying, there is no lobbying by the organization” (Smucker 1999, p. 51).

The tax law establishes two types of lobbying: direct and grassroots. In direct lobbying the organization communicates with legislators or other public offi cials on matters con- cerning legislation in which they have a role to play or with the nonprofi t organization’s own membership. In grassroots lobbying, the organization infl uences the legislative pro- cess by attempting to sway public opinion on policy issues.

The tax law also establishes ceilings for expenditures that may be allocated to lobby- ing, based on the total level of tax-exempt expenditures for the organization. A nonprofi t with annual expenses of up to $500,000, for example, may allocate 20 percent of these expenses for lobbying activities, whereas an organization with tax-exempt expenditures of over $17 million may spend a total of $1 million for lobbying (Smucker 1999, p. 55).

We should point out that many activities by nonprofi ts, and even a wide array of expendi- tures that may be connected with the legislative or public policy process, are not considered

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“lobbying” under the 1976 law. For instance, using contacts with offi cials in the executive branch to infl uence proposed legislation; communicating to members of the organization— as long as they are not encouraged to lobby—even if the organization itself takes a certain position; and advocating legislators on issues that affect the existence, tax-exempt status, or other aspects of operations (the so-called “self-defense” activity) would not be viewed as lob- bying on the part of the nonprofi t.

The right of nonprofi ts to lobby in the public interest was reinforced by the Supreme Court in Legal Services Corp. v. Velazquez (2001). At issue in the case were provisions in the 1996 welfare reform law, which attempted to prohibit legal challenges to the reform legislation from local organizations funded by the Legal Services Corporation. The Court struck down these provisions, stating that because Congress allowed Legal Services Corporation lawyers to advocate for the poor on some matters, federal lawmak- ers could not deprive a Legal Services client of his or her rights to a full and complete legal defense, which might well happen if a lawyer couldn’t challenge the legitimacy of the welfare law (Lenkowsky 2001, p. 40). The ruling has been viewed by many in the nonprofi t community as a potential expansion in the capability of independent-sector organizations, even those that receive federal funding, to advocate for their constituents on legislative issues.

For others, however, the ruling may have the opposite effect. In its analysis of the deci- sion, the Chronicle of Philanthropy characterized Velazquez as a Pyrrhic victory, stating that although the ruling may have some positive impact on the advocacy role of nonprof- its, it also reaffi rmed the Court’s decision in Rust v. Sullivan (1991), in which employees of NGOs that receive federal funding were held to be agents of the government. They forfeit their First Amendment rights to free speech by agreeing to accept the federal grants and contracts (Lenkowsky 2000, p. 40).

As future nonprofi t managers, you should take caution to explore the legal constraints before engaging in lobbying activities, but by no means should you shy away from attempt- ing to infl uence policy decision making on behalf of your constituents. The law is on your side, and you certainly will have greater protection than you may have originally thought for lobbying without fear of threatening your organization’s tax-exempt status.

■ Summar y and Action Implications

Given the complexity of modern society, your work as a public administrator will likely involve a complex set of relationships with all kinds of external groups. Many of these groups will be agencies at other levels of government. Our federal system has evolved from a pattern in which the various levels of government were relatively distinct to a pattern in which funding and programmatic relationships are extremely intense.

The fact that public programs today operate through vast and complex webs of people and organizations—public, private, and nonprofi t—means that new skills are required of the public manager. Any particular program may involve various levels of government, organizations from all sectors of society, and clients or citizens with many different inter- ests and concerns. As a public manager, you must be able to identify the network that is or should be involved in a particular situation and assess the effectiveness of that network.

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To make that judgment, you will need to consider several factors. The fi rst is communi- cations, the type of information that goes from one organization to another and how it is transmitted. Second, you might focus on exchanges of goods and services, money, and per- sonnel among the organizations involved. Third, you might examine the normative aspect of the relationship—that is, what each organization expects of the other and what each is willing to contribute to the alliance. Examining these same categories may also suggest ways to improve the effectiveness of interorganizational relationships.

The interorganizational nature of modern public administration also has interesting implications for the interpersonal skills you must bring to the job. Increasingly, the govern- ment offi cial responsible for a given program must be skilled in negotiating relationships with those outside the agency to ensure that the program proceeds effectively and respon- sibly. More and more, the public administrator works in a world in which older images of organizational hierarchy and control are quickly giving way to newer images of “manag- ing in ambiguity” and “negotiating organizational boundaries.” The interorganizational nature of public administration today has a direct effect on what skills managers need.

TERMS AND DEFINITIONS

Block grants: Grants in which the money can be used for nearly any purpose within a specifi c functional fi eld.

Capital grants: Grants for use in construction or renovation.

Categorical or project grants: Grants requiring that the money may be spent for only a limited purpose; typically available on a competitive basis.

Charter: Local government’s equivalent of a constitution.

Cooperative federalism: Greater sharing of responsibilities between federal and state governments.

Coproduction: Using volunteer activity to supplement or supplant the work of government offi cials.

Councils of government: Oversight bodies representing various localities to help coordinate local affairs.

Cross-cutting requirements: Rules that apply to most grant programs.

Dillon’s Rule: Municipalities have only those powers granted in their charters; cities are creatures of the state.

Direct orders: Requirements or restrictions that are enforced by one government over another.

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Dual federalism: Pattern in which federal and state governments are struggling for power and infl uence with little intergovernmental cooperation.

Entitlement grants: Grants that provide assistance to persons who meet certain criteria.

Formula grants: Grants that employ a specifi c division rule to indicate how much money any given jurisdiction will receive.

Grants: Transfers of money (and/or property) from one government to another.

Home rule: Provision allowing cities greater autonomy over local activities.

Intergovernmental relations: A term encompassing all the complex and interdependent relations among those at various levels of government.

Interorganizational networks: Pattern of relationships within and among various groups and organizations working in a single policy area.

Mandate: Order requiring a government to do something.

Negotiated investment strategy: Bringing together representatives of all affected groups to set priorities for funding.

Operating grants: Grants for use in development and operation of specifi c programs.

Picket-fence federalism: Pattern of intergovernmental relations in which the horizontal bars represent levels of government and the vertical slats represent various substantive fi elds.

Preemption: Federal government efforts to preempt an area traditionally associated with state government.

Privatization: Use of nongovernmental agencies to provide goods and services previously provided by government.

Revenue sharing: Grant pattern in which the money can be used any way the recipient government chooses.

Special districts: Local governments created for a specifi c purpose within a specifi c area.

Supply-side economics: Argument that decreased taxes and spending will stimulate capital investment and economic growth.

Terms and Defi nitions 1 2 3

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STUDY QUESTIONS

1. Although intergovernmental relations involve more than fi nancial matters, funding programs have a signifi cant role in the process. Defi ne and give examples of the vari- ous kinds of grants and funding programs.

2. Compare and contrast “dual federalism,” “cooperative federalism,” and “coercive federalism.” Describe the approach to federalism used during the Clinton presidency.

3. In the last decade, states and localities have faced signifi cant changes in funding from the federal government. Discuss the reasons for the changes and how they affect rela- tions among the various levels.

4. How do governmental mandates and regulations affect operations at the state and local levels?

5. Government has been moving to “privatization” of some goods and services. How will this trend affect intergovernmental relations?

6. Explain the importance and use of contracting for services and goods.

CASES AND EXERCISES

1. Analyze the relationship between state and local governments in your state. What legal requirements govern state-local relationships? What, if any, bodies exist to help in intergovernmental cooperation? What kinds of mandates has the state imposed on local governments? What has been the reaction to these? How do you think state- local relations could be improved?

2. Divide the class into several groups of six to eight students each. Have one group assume the role of a granting agency charged, by legislation, with providing funds to local communities to help in projects that improve the economic potential of the com- munity and assist low-income and disadvantaged groups in the community. Assume that the agency has $50 million to distribute, but that the legislation has given the granting agency the authority to determine all other details of the grant program.

The agency group must fi rst defi ne as clearly as possible the intent of the legisla- tion and then prepare guidelines outlining the types of projects that will be funded under the program. A written Request for Proposals (RFP) should then be prepared and distributed to a set of potential applicant communities, each represented by one of the other groups in the class. The RFP should contain, at a minimum, a description of the program, criteria by which proposals will be evaluated, examples of projects that might be funded, and instructions for submitting proposals for funding (includ- ing a deadline for applications).

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Each community group will then prepare a grant application to support a project or projects it wants for its community. Members of each community group may communi- cate with one representative of the agency designated as liaison to that community, but should not talk with other agency members. Community groups can communicate with one another if they wish. By the deadline contained in the RFP, all proposals should be submitted to the agency. The agency will then determine which, if any, projects will be funded and at what levels. The results should be communicated to all the communities.

Following the exercise, the class as a whole should discuss the entire process. You might want to focus on issues such as these.

• What is the role of the agency in defi ning the kinds of projects that will be funded? • What types of instructions are necessary to enable communities to compete

fairly and effectively? • What was most attractive about the proposals that were funded? • For what reasons were other proposals not funded? • What effect on the fi nal decisions did communications between the community

and the liaison from the agency have? • Did “politics” play any role?

FOR ADDITIONAL READING

Bernstein, Susan R. Managing Contracted Services in the Nonprofi t Economy. Philadelphia: Temple University Press, 1991.

Boris, Elizabeth T., and C. Eugene Steuerle. Nonprofi ts and Government: Collaboration and Confl ict. Washington, DC: Urban Institute, 1999.

Cook, Brian J. Bureaucracy and Self-Government. Baltimore: Johns Hopkins University Press, 1996.

Cooper, Phillip J. Governing by Contract. Washington, DC: CQ Press, 2003. Cooper, Phillip J., and Chester A. Newland. Handbook of Public Law and Administration. San

Francisco: Jossey-Bass, 1997. Cooper, Phillip J., et al. Public Administration for the Twenty-First Century. Fort Worth, TX: Harcourt

Brace College Publishers, 1997. Gage, Robert W., and Myrna P. Mandell, eds. Strategies for Managing lntergovernmental Policies

and Networks. Westport, CT: Greenwood Press, 1990. Goldsmith, Stephen, and William D. Eggers. Governing by Network: The New Shape of the Public

Sector. Washington, DC: Brookings Institution Press, 2004. Hill, Kim Quaile, and Kenneth R. Mladenka. Democratic Governance in American States and Cities.

Pacifi c Grove, CA: Brooks/Cole, 1992. Hill, Larry B., ed. The State of Public Bureaucracy. Armonk, NY: M. E. Sharpe, Inc., 1992. Judd, Dennis R., and Todd Swanstrom. City Politics: Private Power and Public Policy. New York:

HarperCollins College Publishers, 1994. Katz, Michael B. The Price of Citizenship: Redefi ning the American Welfare State. New York:

Metropolitan Books, 2001. Kemp, Roger L., ed. Privatization: The Provision of Public Services by the Private Sector. Jefferson,

NC: McFarland & Company, 1991.

For Additional Reading 1 2 5

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Kettl, Donald F. Government by Proxy. Washington, DC: Congressional Quarterly Press, 1988. Kettl, Donald F. Sharing Power: Public Governance and Private Markets. Washington DC: Brookings

Institution Press, 1993. Levin, Martin, and Mary Sanger. Making Government Work. San Francisco: Jossey-Bass, 1994. Light, Paul C. Sustaining Innovation: Creating Nonprofi t and Government Organizations that

Innovate Naturally. San Francisco: Jossey-Bass, 1998. Light, Paul C. Making Nonprofi ts Work: A Report on the Tides of Nonprofi t Management Reform.

Washington, DC: Brookings Institution Press, 2000. McLaughlin, Curtis. The Management of Nonprofi t Organizations. New York: Wiley, 1986. National Academy of Public Administration. Privatization: The Challenge to Public Management.

Washington, DC: National Academy, 1989. Nice, David C. Federalism: The Politics of Intergovernmental Relations. New York: St. Martin’s

Press, 1987. Peirce, Neal R., Curtis Johnson, and John Stuart Hall. Citistates: How Urban America Can Prosper

in a Competitive World. Washington, DC: Seven Locks Press, 1993. Peterson, Paul. The Price of Federalism. Washington, DC: Brookings Institution Press, 1995. Rivlin, Alice M. Reviving the American Dream: The Economy, the States, and the Federal Government.

Washington, DC: Brookings Institution Press, 1992. Rosenbloom, David H. Building a Legislative-Centered Public Administration: Congress and the

Administrative State, 1946–1999. Tuscaloosa, AL: University of Alabama Press, 2000. Rusk, David. Cities without Suburbs. Baltimore: Johns Hopkins University Press, 1993. Salamon, Lester M., ed. Beyond Privatization. Washington, DC: Urban Institute Press, 1989. Salamon, Lester M. Partners in Public Service: Government-Nonprofi t Relations in the Modern

Welfare State. Baltimore: Johns Hopkins University Press, 1995. Smith, Steven Ragbeth, and Michael Lipsky. Nonprofi ts for Hire: The Welfare State in the Age of

Contracting. Cambridge, MA: Harvard University Press, 1993. Vincent-Jones, Peter. The New Public Contracting: Regulation, Responsiveness, Relationality.

New York: Oxford University Press, 2006.

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