Public Administration ‒ The Good, The Bad, The Ugly

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 administrators 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 couple of decades, it may be more helpful to focus not on the

individual agency, but on the relationships among many different groups: public, private, and

nonprofit (Kettl, 2009). Indeed, today more than ever, the effectiveness of public programs

depends on the ability of various agencies to cooperate in processes of service delivery. This development is explored further in the box “Exploring Concepts: Transformation of

Governance” later in this chapter.

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 welfare program

that replaced Aid to Families with Dependent Children (AFDC) under the Personal

Responsibility and Work Opportunity Reconciliation Act of 1996, provides funding to the

states for public assistance and welfare-to-work initiatives (Plotnick et al., 2011). The states

in turn rely on a variety of local government, for-profit, and nonprofit organizations for

service delivery. These organizations may provide the services themselves, or they may

contract with other organizations (again, public, private, or nonprofit) for carrying out the programs. In many cases, an individual or family may receive an array of public assistance

without ever coming into contact with a government employee (Kettl, 2000, 2009).

Another example of intergovernmental and interorganizational cooperation is in the area of

emergency management and disaster relief. Hurricane Katrina was the single 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, forty-two states and the District of Columbia received

presidential emergency declarations to shelter the evacuees. The Federal Emergency

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 governments,

nongovernmental organizations, local communities, and businesses, worked (and still

works) 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 damages caused by the hurricane. More than $15.3 billion has been paid out to National Flood Insurance Program policyholders”

(Pittman, 2009, p. 149). 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 levels, but it also provides a significant example of the importance of interorganizational

cooperation and coordination (Liu et al., 2011).

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 department 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 benefits for businesses

willing to locate there. Again, a variety of government and nongovernment entities are involved in the task of economic development.

Log in to -w-w-w-.-c-e-n-g-a- g-e-.-c-o-m and open CourseReader to access the reading:

Read “Public Management in Intergovernmental Networks: Matching Structural Networks and Managerial Networking,” by Kenneth J. Meier and Lawrence J. O'Toole, Jr. As we have seen, public administrators

interact with a wide variety of other groups and organizations both inside and outside government. We have pointed out that networks of organizations— public, private, and nonprofit—are increasingly involved in the development and implementation of public policy. This trend amounts to a change from intergovernmental relations to interorganizational relations.

What are some of the factors that contribute to an increase in network governance? What are some of the advantages to working through networks? What are some of the disadvantages? Can you think of examples of public policies in your own area that are being carried out by such networks?

One can easily understand why the effectiveness of many public programs depends on the

quality of the relationships among various organizations (Bevir, 2011; Goldsmith & Eggers,

2004). Some analysts for this reason emphasize the importance of the interorganizational

networks that develop in various policy areas. 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 (see the box

“Exploring Concepts: Networks and Network Management”). Hult and Walcott (1990) wrote, “Governance networks link structures both within and across organizational boundaries.

Like governance structures, networks may be permanent or temporary, formal or informal.

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 networks” (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 difficulties many programs encounter. On the other hand, many such networks have proven enormously stable over time, and others have capitalized

on the inherent flexibility 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.

Exploring Concepts

NETWORKS AND NETWORK MANAGEMENT

The first 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 governmental boundaries to anticipate and prepare for problems that

involve a great deal of uncertainty, such as earthquakes, wildfires, 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

relationships 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 ongoing 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 different

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 performed 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.

…The first task [that leads to effective network management] 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 for 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 nonprofit 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.

Management of conflict is the third task of network managers. Conflict 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 conflict resolution. These devices help to create

dispute resolution mechanisms for conflicts that arise between managers of network organizations 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

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The Development of Intergovernmental Relations To operate public programs effectively and responsibly, you must understand the

relationships among levels of government. There are various ways to define 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 powers 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

specified 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 specifically to the central government (to conduct foreign relations, to regulate

interstate commerce, and so on); some are reserved by the states (to conduct elections, 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 it can

also 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 relations has

been recognized in several structural developments. At the federal level, a permanent Advisory

Commission on 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 specific titles vary). Finally, many scholars and practitioners have begun to emphasize the managerial processes involved in

intergovernmental relations by employing the term intergovernmental management.

A key to understanding intergovernmental relations in this country involves understanding

the changing patterns used to fund public programs. Although intergovernmental relations consist of much more than money, financial questions are inevitably at the core of the

process. Thus, definitions 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 consolidated into block grants,

which are used for nearly any purpose within a specific functional field, 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 classified in terms of how they are made available. A formula grant

employs a specific 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 qualified 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 specific programs,

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.

Networking

Some basic information on federal-state-local interactions can be found at -w-w-w-.-u-s-a-.-g-o-v or -w-w-w-.-w-h-i-t-e-h-o-u-s-e-.-g-o-v. For coverage of the changing

roles of state and local government, go to Governing magazine at

-w-w-w-.-g-o-v-e-r-n-i-n-g-.-c-o-m.

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 specific grant might be made

available on a competitive basis strictly for use in programs for job training and may require

local matching funds.

What Would You Do?

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?

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

influence, and there was relatively little intergovernmental cooperation—indeed, there was

substantial conflict.

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 development of

higher education, but it also set a precedent in the structure of its grants (Nathan et al., 1987).

No longer were grants made in a fairly open-ended fashion; specific 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.

FIGURE 3.1

Images of American Federalism

© Cengage Learning

The adoption of grant programs such as the Morrill Act was accompanied by considerable 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 previously 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 conflict among the various levels of government. The federal government sought to deal effect ively 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 political 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).

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 interdependence. As opposed to the conflict 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, and 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, and local relations that emerged from the New Deal is illustrated

by several key programs. The first was the Federal Emergency Relief Administration, 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 programs also supplemented relief efforts. The best known was the Works Progress Administration (WPA),

a program that used federal money to hire state-certified 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 the following:

1. A federal definition of the problem

2. A transfer of funds, primarily to the states (rather than localities)

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 particular

category of activity, such as public works. Indeed, the use of categorical grants as the primary

mechanisms for federal-to-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 “cooperating 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

intergovernmental 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. The new federal programs focused mainly on urban problems and problems of the disadvantaged. 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 fiscal 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 significant for both their size and shape. Substantially more aid was aimed directly at local governments, school districts, and various

nonprofit groups, as opposed to the previous pattern of aid primarily to states. In addition,

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 specific 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, intergovernmental

relations took on an increasingly competitive tone (Wright, 1988, pp. 81–90).

Throughout this period, the intergovernmental system was becoming increasingly

dominated 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 official,

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 federalism. The horizontal bars of the fence represented the levels of government, and the

vertical slats represented various substantive fields, such as health, welfare, education,

employment, and training (see Figure 3.2).

President Nixon's administration brought about a reaction against many of the

developments 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.

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 leadership, 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 five 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 specific programs would be developed 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.

FIGURE 3.2

Picket-Fence Federalism

SOURCE: From Understanding Intergovernmental Relations, 4th edition, by D. Wright ©

2003. Reprinted with permission of the author.

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 that local government jobs would be filled 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 Governors Association, and others. Later in the Carter years, however, a new mood of fiscal restraint, combined with

Carter's own fiscal conservatism, was something states and localities found difficult to

handle. From the standpoint of state and local governments, the reductions of the late Carter

years were just the beginning.

The Reagan and First Bush Years

The Reagan and the first Bush administrations brought major structural changes in the pattern of fiscal federalism, including the elimination of general revenue sharing and a

reworking of the block grant system. However, these years were more significant primarily

because of both administrations' efforts to reduce the size of the federal government through

a variety of tax and spending cuts and to return responsibility for major areas, especially

social welfare, to the states.

An ideological commitment to decrease the size and influence of the federal government and

to recognize the distinction between the powers granted to federal and state governments undergirded President Reagan's efforts to eliminate federal funding and federal regulation

of state and local activity wherever possible. 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, using the term turnovers rather than turnbacks. These kinds of proposals became intertwined with President Reagan's 1981

efforts to reduce taxes through supply-side economics, an approach based on the idea that

decreased taxes and spending will stimulate capital investment and, in turn, economic growth

(Stone & Sawhill, 1984). Because the Reagan administration protected the defense budget, it sought the majority of the cuts in federal grant programs and general government operations.

State and local officials decried the depth of the Reagan administration's cuts and its failure

to make available any revenue sources to pick up the slack, especially since the tax cuts failed

to produce the expected economic growth. Concerns were increasingly voiced that efforts to

balance the budget were especially damaging to the poor—for example, by reducing

eligibility for Aid to Families with Dependent Children (AFDC) (Nathan et al., 1987, pp. 52 –

57). Although the public was concerned about excessive spending, it became clear that neither Congress nor the public considered spending for social welfare, environmental

protection, and infrastructure maintenance excessive. Consequently, by the middle of the

second Reagan term, eligibility requirements for AFDC were restored; Congress funded the

environmental Superfund to clean up toxic wastes and repair leaking underground tanks at a significantly higher level than the president requested; and the Highway Trust Fund for

highway improvement was passed despite Reagan's veto. On the other hand, reductions

continued in specific areas, particularly in general revenue sharing. Revenue sharing for the

states had been eliminated early in the Reagan administration; in 1986 revenue sharing for local governments was ended as well.

President Bush continued the Reagan approach to federalism, including the strategy of

turning various programs over to the states. Bush made important but largely symbolic gestures to the states and localities, partly because he could do little else. The budget deficit

continued unabated, which led to the Budget Enforcement Act (BEA) of 1990. Under the BEA,

any legislation that exceeds the budget ceiling in its category will trigger an across-the-board

cut in that category. When this legislation was combined with the savings and loan bailout,

there was little enthusiasm left for expanding domestic spending, including state and local aid.

The Clinton Presidency

During the Clinton administration, the philosophical foundation of New Federalism

remained in place, with a focus on regulatory reform and shifting decision-making authority to state and local governments. However, the character and scope of this devolution of power

were interpreted in vastly different ways by the president, the Republican House, and the

more moderate leadership in the Senate. In the latter years of the Clinton administration, state and local governments offered their own ideas on federalism and 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 intergovernmental relations, a position characterized by sensitivity to state and local

governments. Within months of taking office, the administration identified the removal of

burdensome federal regulations as a primary objective. President Clinton issued executive

orders that prevented federal agencies from imposing mandates without financial support. Although administrative agencies gained regulatory powers, central review was continued

to ensure that new regulations were in line with the president's priorities. The president

reinforced his stance with another order that established a system of state and local review

of intergovernmental regulations.

The Clinton administration's New Federalist philosophy also was evident in programmatic

areas, such as its drive to “end welfare as we know it.” 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

included putting time limits on benefits, tying welfare to work requirements, giving

authority for welfare programs to state governments, and limiting or eliminating access to

public assistance for legal immigrants and the disabled. This philosophy also was apparent in the Empowerment Zone/Enterprise Community Program, the Clinton administration's

main community and economic development initiative, and the Goals 2000: Educate America

Act, its key education initiative. Both involved efforts to expand state and/or local discretion

(Walker, 1996), reinforcing the belief that reducing federal regulations and handing decision-making power to state and local governments would place those closest to a given

issue in a better position to effect innovation and change.

Vice President Al Gore's National Performance Review (NPR) and related efforts further

advanced the Clinton administration's position on intergovernmental relations by focusing

on a variety of alternative strategies for managing public programs. These strategies, which

echoed Osborne and Gaebler's (1992) Reinventing Government, injected a spirit of entre-

preneurship into the federal government. Gore's NPR called for “a new customer service

contract with the American people, a new guarantee of effective, efficient, and responsive government,” along with several practical measures that affected intergovernmental

relations, such as collapsing categorical grants into more flexible funding streams and

removing unfunded federal mandates.

Regulatory reform and removing unfunded mandates also became key issues for the 104th Congress. As heralded 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 financial resources for their implementation. With assistance

from the Clinton administration, Republican lawmakers revised two measures from the preceding Congress into the Unfunded Mandates Reform Act of 1995, under which the cost

of any future mandate would need to be spelled out by the Congressional Budget Office. The

act also raised the president's executive orders mentioned above to a statutory level, binding

agencies by law to find less expensive, more flexible ways of instituting regulations.

During President Clinton's second term, however, ties with the Republican Congress

degenerated into political gridlock. Though the two camps did come together on measures

to eliminate the federal deficit and reform the nation's welfare system, the prevailing environment was one of partisan extremism. Moreover, even the hallmarks of the period

failed to gain support among many state and local governments that, while recognizing the

need for fiscal constraint and welfare reform, remained concerned that the cost of the

measures would fall primarily on the subnational levels of administration.

The impact of NPR and “reinventing government” also remains in question. While a variety

of federal agencies implemented reform during both Clinton terms, many were fraught with

political and administrative challenges. Reinvention, compared to many political reform movements, has had a fairly long life span. Examples can be found at all levels of government,

and in the nonprofit sector, as reformers strive to create a more responsive, entrepreneurial,

and results-based system of governance. 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 value of making federal agencies more responsive or of

ensuring effectiveness in delivering public services, many have come to recognize that

productivity and performance should not be the only measures of success.

The Bush Administration

The political conditions associated with the election of George W. Bush in 2000—his agenda

to streamline the government, increase the role of nongovernmental organizations in the

policy process, and shift to more market-based models of service delivery, coupled with the

passage of the 1995 Unfunded Mandates Reform Act—hinted at the possibility of a move

away from federal policy centralization. Unlike many of his recent predecessors, President

Bush did not offer specific proposals signaling his philosophy on federalism. In practice,

however, the administration appeared to have been less concerned with federalism and

more focused on efforts to extend the role of the federal government (Nathan, 2006).

While some Bush administration initiatives were devolutionary in nature, such as a state-

driven change in Medicaid policy and grant consolidations of community development, the

Bush era was characterized primarily by its expansion of centralizing actions, in some

instances overturning “cooperative federalism frameworks that had evolved over many years” in favor of “a more insistent, demanding federal role” to accomplish policy and

political goals (Posner, 2007, p. 408). This emphasis on less cooperative and more coercive

kinds of policy tools—what we might call coercive federalism—was not new, as the use of

mandates and preemptions of state and local authority had been increasing since the 1970s (Kincaid, 1990). The continuation of this trend was evident in many of the Bush

administration's actions, including its approach to homeland security, education, Medicare,

and the administration of elections.

The attacks of September 11, 2001, and the effects of Hurricane Katrina in 2005 resulted in

several proposals and directives by the Bush administration aimed at centralizing

emergency preparedness and response. For example, the Department of Homeland Security,

created under President Bush in response to 9/11, developed federal standards for thirty- six areas of emergency planning and response that cover fifteen types of emergencies.

Another measure, the Real ID Act of 2005, established federal standards for driver's licenses,

requiring proof of identity and lawful status, security features to be incorporated into each

card, and security standards for offices that issue licenses. Residents in states that do not comply by January 2013 will lose acceptance of their driver's licenses by federal entities,

including security personnel in airports. In response to problems in mobilizing National

Guard troops in the aftermath of Hurricane Katrina, a rider to the 2007 Defense Authorization Act gave presidents the authority to federalize the National Guard without the

permission of a governor in times of natural disasters.

Despite a Republican history of supporting local control of schools, the Bush administration

in 2001 proposed the No Child Left Behind Act (NCLB), which created federal requirements

for testing and accountability and, thus, a stronger federal role in education policy. Under the

act, while standards are set by the individual states, schools receiving federal funds must

administer a statewide standardized test each year to all students, students must make

“adequate yearly progress” in test scores, and schools must provide highly qualified teachers for all students. NCLB marked “an expansion of federal authority over programmatic aspects

of education and raises the expectations of federal policy by emphasizing equal educational

outcomes” (Sunderman, 2009, p. 11).

President Bush also supported the Medicare Prescription Drug, Improvement, and

Modernization Act of 2003 (MMA), “the largest expansion of the federal role in health care

since 1965” (Conlan & Dinan, 2007, p. 282). The act expanded Medicare to include

prescription drug coverage that would be administered by private health plans. It also included a major restructuring of the program, relying heavily on private insurance for

benefit delivery and increasing beneficiary cost-sharing responsibilities. The new drug

benefit provision, known as Medicare Part D, shifted drug coverage for low-income beneficiaries from Medicaid to Medicare, thus relieving states of some prescription drug

coverage costs for these “dual eligibles.” This shift, however, was offset by added

administrative costs as states became responsible, along with the Social Security

Administration, for determining who qualifies for assistance, increasing administrative costs. States also were required to pay back the Medicaid savings on these dual eligibles,

which, in essence, levied a federal tax on state Medicaid spending (Matthews, 2004).

The controversy over the 2000 presidential election led to the passage of the Help America

Vote Act (HAVA), which President Bush signed into law in October 2002. The act created new federal standards and provided federal funding aimed at regulating significant aspects of the

administration of state and local elections. Requirements covered voting systems,

provisional ballots, and access to polling places for the disabled. The act also required

centralization of statewide voter databases and uniform processes for vote definitions.

Although the act is centralized in nature, much of the implementation was framed in a

devolutionary way, as key decisions on defining several of the requirements were left to the

states (Posner, 2007). An interesting commentary on the broader trends in governance can be found in the “Exploring Concepts” box “Transformation of Governance: Globalization,

Devolution, and the Role of Government.”

Exploring Concepts

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 nonprofit 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-profit

and nonprofit 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

functional specialization and process control. However, new place-based problems have

emerged: How can government's functions be coordinated in a single place? Can environmental regulations flowing down separate channels (air, water, and soil) merge to

form a coherent environmental 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? Budgetary 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 officials—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 officials take a

similar view: They create programs and appropriate money. They expect government agencies to deliver the goods and services. When problems emerge, their first instinct is to

reorganize agencies or impose new procedures—when the problem often has to do with

organizational structures and processes that no longer fit reality. The performance of

American government—its effectiveness, efficiency, 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.

Obama and Federalism

The economic crisis in 2008 and a commitment to enacting health-care reform legislation

prompted a great deal of activity by the Obama administration, resulting in several national

initiatives and inciting widespread concerns about policy centralization and the expansion

of the federal government's role. While some initiatives involved coercive federalism

strategies, the administration also turned to a variety of cooperative tools, following a path “that was far more nuanced and cooperative than that suggested by early expectations”

(Conlan & Dinan, 2011, p. 421) in its attempts to promote economic recovery, regulate the

financial industry, and reform health care.

President Obama gave an early indication regarding his approach to federalism in a

memorandum early in 2009 directing agencies to preempt state law only in cases with a sufficient legal basis for doing so. The memorandum also included restrictions on including

statements of preemption in regulations and directed agencies to conduct a review of

regulations enacted over the previous ten years that included preemptive statements to

determine if preemption was justified. Another memo in 2011 directed agencies to work with state, local, and tribal governments to create greater administrative flexibility and

reduce burdens created by federal regulations (Metzger, 2011).

The American Recovery and Reinvestment Act (ARRA), also known as the Recovery Act,

enacted shortly after President Obama took office, looked to the intergovernmental system to play a key role in recovery. The ARRA provided critical relief for state and local budgets

hit hard by the recession of 2008, including funding for existing federal aid programs in

education, community development, and social services. The use of established programs

was aimed at enabling faster state and local spending, although it did little to promote

innovation and reform (Conlan & Dinan, 2011). The ARRA also included flexible funding

related to Medicaid and education, aimed at reducing the impact of the rapid decline in state

and local revenues and minimizing layoffs of government employees. These funds, however, were restricted by maintenance-of-effort requirements, under which states could not reduce

services covered under Medicaid or reduce education funding to below FY 2006 levels. The

ARRA also imposed requirements on states to use the funds immediately or lose them, and

it included extensive requirements regarding transparency and accountability.

Although historically the states played a major role in the oversight of financial products, the

2008 economic crisis prompted calls for major reforms in the regulation of financial

institutions. In 2010 President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, which overturned a Bush administration policy of preempting

state authority over federally chartered national banks to protect consumers and maintain

competition. The act essentially safeguarded existing state laws and reaffirmed state

authority to enforce federal consumer protection laws even as it created a more powerful

regulatory effort at the federal level. Although initial versions of the bill included an

expansion of federal preemption, the Obama administration intervened to help protect state

authority (Conlan & Dinan, 2011).

The Obama administration's health-care reform initiative, which resulted in the Patient Protection and Affordable Care Act of 2010 (ACA), took aim at overhauling the nation's

health insurance system. ACA imposed sweeping new federal requirements and expanded

coverage to 32 million of the nation's 55 million uninsured. Although the provision requiring individuals to have a minimum level of coverage generated the most controversy, the

greatest impact on the states came from a significant expansion of Medicaid and the

establishment of health exchanges. Although the federal government would cover most of

these costs, the states would assume a portion of these along with increased administrative costs. States also are required to maintain existing eligibility and benefit levels for Medicaid

and the Children's Health Insurance Program (Metzger, 2011). In short, while the states will

have some flexibility and maintain some major responsibilities, the ACA represents a

sweeping centralization effort at the federal level.

While the initiatives advanced by the Obama administration clearly involve the expansion of

federal authority, they also are notable for the extent to which “states are offered central

roles to play in the new federal regimes, with broad grants of authority and federal funds to

entice their participation” (Metzger, 2011, p. 599). This “hybrid” model of intergovernmental relations “mixes money, mandates, and flexibility in new and distinctive ways” (Conlan &

Dinan, 2011, p. 443). However, in the face of mounting federal deficits and rising ideological

and political polarization, it remains to be seen whether such an approach is sustainable.

Certainly a key issue for President Obama will be whether he can achieve deficit reduction while also getting Congress to pass programs for innovation, infrastructure, and education.

Judicial Influence

One final point relates to the role of the judiciary in shaping intergovernmental relations. Through the 1990s, students of federalism became increasingly aware of the role of the

judiciary, especially the Supreme Court, in defining the relationship between the 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 reaffirmed in others, an important outcome has emerged. The Court has 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 federalism

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 first 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 Discrimination

Act, as the Equal Employment Opportunity Commission had ruled. “The significance of this

[the Gregory ruling] is that it bars individuals and groups who wish to use federal 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 certain 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 considered 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 both alternatives, stating that Congress must not view state and local governments as “mere

political subdivisions… [or] regional offices” (Wise, 1998, p. 95) of the national government

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 officers to serve as entities of the national government in executing

the regulation. The federal government, in an interesting twist, argued that unlike in 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 officials to execute or administer federal regulations, 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 Education

(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 reaffirmed Congress's authority to establish state liability 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 funding program

remained clear enough so that states would have adequate notice of the federal 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 benefits

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 benefits, a majority determined that fiscal efficiency 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 project,

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. On one

hand, the Court clearly has reconsidered its deference to Congress on issues of

intergovernmental relations, a practice it had followed throughout 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 system,

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 financially and administratively.

Funding Patterns

As we noted earlier, federal aid to state and local governments began as early as the Civil

War with the passage of the Morrill Act, establishing land-grant colleges. Soon after, federal

aid was extended to agriculture, highways, and public health, among other areas. During the Great Depression, federal aid also went to income security and social welfare. But the most

significant increases in federal grants occurred after World War II. There has been a dramatic

increase in federal funding of state and local activities over the last fifty years. In 1960,

transportation received the largest amount of federal funding, but by 1970 there had been significant increases in funding for education, training, employment, and social services.

Since 1980, changes in the relative amounts among functions reflect large increases in grants

for health (primarily Medicaid) and for income security. Funding for health care alone

increased dramatically over the last two decades, from $43.9 billion in 1990 to $290.2 billion in 2010.

Over the last twenty years, federal dollars have amounted to approximately 20 percent of

the amount spent by state governments. But that share increased to 25 percent in 2010, as

the federal government sought to assist states and local governments in getting through the

recession. Specifically, as noted above, the federal government provided additional support

through the American Recovery and Reinvestment Act (Recovery Act), enacted in February

2009. Federal grants to state and local governments increased from $538.0 billion in 2009 to $608.4 billion in 2010 and were estimated to be $625.2 billion in 2011. These amounts

were used by state and local governments to maintain earlier service levels in the education,

health-care, energy, water, and other programs, and to avoid greater cuts to state services

and increases in taxes. Since state and local governments usually recover at a slower rate than other sectors, they will continue to face fiscal difficulties for the foreseeable future.

However, the 2012 budget proposed a decrease in the overall amounts of federal grant

funding because most of the funds provided under the Recovery Act will have been spent

(Office of Management and Budget, 2012).

Without question, the last several decades have presented a variety of fiscal 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 deficit, most states have continued to

operate with balanced budgets over the last decade typically relying much more on spending

cuts then raising new revenues.

Once considered a weak link in the federal system, over the last thirty years, states have

dramatically increased their capacities. Although there are still considerable variations in states' powers, most states have undertaken important institutional reforms (such as

developing legislative audits), expanded the scope and professionalism of their operations

(to include new services in areas such as energy planning and conservation or new programs

in areas such as performance management), and demonstrated remarkable fiscal restraint.

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 activity in the international arena. For example, all states have offices 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 themselves

overseas. Over forty states also maintain permanent offices overseas, with some of the larger

states having offices in several countries.

Preemptions and Mandates

Preemptions As discussed previously, although our federal system of government establishes certain federal powers, reserves certain powers to the states, and permits

certain actions at both levels, there has long been controversy about the exact

definitions 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 and

local governments. Many state and local officials argued against the amendments, citing the

difficulties in applying the standards to government—for example, how do you measure the

hours a firefighter 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.

Networking

For data relating to federal funding to state and local governments, go to the 2012 Statistical

Abstract of the United States at

http;//-w-w-w-.-c-e-n-s-u-s-.-g-o-v-/-c-o-m-p-e-n-d-i-a-/-s-t-a-t-a-b-/ or to the 2013 budget

at the Office of Management and Budget at

http;//-w-w-w-.-w-h-i-t-e-h-o-u-s-e-.-g-o-v-/-o-m-b-/-b-u-d-g-e-t-/-O-v-e-r-v-i-e-w-/.

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 government” 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 sufficient input into the national legislative process, through the election of members of Congress and the influence 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 political 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 coffin 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 firms 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 intrusion into a

critical area of state financing, 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 officials, 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 minimum,

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 reaffirmed 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 judicial

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 localities, 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 governments 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 continue to derive directly from the actions of the state.

There are various mechanisms involved in the relationship between the federal government and the states and between the states and localities. Preemptions involve the federal

government preempting state action traditionally associated with the lower level of

government. 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 significant 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).

As we have seen, President Obama, recognizing the limitations that preemptions place on the states, issued a memorandum on May 20, 2009, requiring executive offices to limit

preemptions of state power. In part the memorandum read:

The purpose of this memorandum is to state the general policy of my Administration that preemption of State law by executive departments and agencies should be undertaken only

with full consideration of the legitimate prerogatives of the States and with a sufficient legal

basis for preemption. Executive departments and agencies should be mindful that in our

Federal system, the citizens of the several States have distinctive circumstances and values, and that in many instances it is appropriate for them to apply to themselves rules and

principles that reflect these circumstances and values. (Presidential Memorandum, May 20,

2009)

Mandates The New York and Printz cases deal with what are called direct orders,

requirements 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 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 program. “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-specific, 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).

What Would You Do?

You are in charge of a coalition combating domestic violence. The various nonprofit

organizations that are the primary service delivery groups in this area have complained to you that a new state initiative to stop human trafficking will have the effect of reducing their

capacity to help current victims of domestic violence and abuse. What would you do?

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 advancing

regulatory and administrative objectives has been reaffirmed in several Supreme Court

decisions, notably Cedar Rapids Community School District v. Garret (1999) and Davis v. Monroe County Board of Education (1999).

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, mandates 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.

For nonprofits, 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 nonprofit 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 nonprofit 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 nonprofit management reform:

“Unfortunately, the nonprofit sector is caught in the middle of an unrelenting contest

between competing philosophies and advocates of reform, all of which produce significant

motion back and forth across different reform ideologies” (Light, 2000, p. 45). The varying

philosophical 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 guidelines for

performance (or “outcome”) management by nonprofit organizations, and an increasing

number of local United Ways have set reporting standards for agencies receiving grants.

Similarly, many foundations (large and small) have made interagency partnerships an eligibility requirement for grant programs. If a nonprofit service provider wants to apply for

a grant, the leadership must show how the agency will “collaborate” with other nonprofits,

government, and even for-profit firms.

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 unfinanced Federal Government mandates… If Congress

passes a mandate, it should be forced to pay for it and to balance the cost with savings

elsewhere. 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

president 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 five years.

An important step forward was taken in March 1995, when President Clinton signed the

Unfunded Mandates 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 implications of mandates

for state and local activities and, in some cases, authorize funding f or 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 state, local,

and tribal governments. UMRA also gives Congress the authority to defeat or alter a bill that

would impose costs for state, local, and tribal governments above the 2011 threshold of $71 million for intergovernmental mandates.

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, unfunded mandates continue. For example, the Bush administration

received criticism from educational groups as well as state and local officials for the presumably unfunded mandates required by the No Child Left Behind Act. Similarly, the

Obama administration was criticized for including unfunded mandates in the Patient

Protection and Affordable Care Act, the president's health-care reform act and a signature piece of his legislative agenda. In both cases, lawsuits were filed by a number of states

seeking remedy from these supposedly unfunded mandates.

Subnational Relationships

Even focusing on state and local activities, we find 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 relationships involving various state governments are not based

in constitutional doctrine, however, but are rather the result of political practices over

the years.

Relationships among states are not without conflict. 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, California recently established the

Governor's Office of Business and Economic Development, which is designed to serve as

California's single point of contact for economic development and job creation efforts. “GO-

Biz offers a range of services to business owners including: attraction, retention and

expansion services, site selection, permit streamlining, clearing of regulatory hurdles, small

business assistance, international trade development, assistance with state government, and

much more” (http;//-b-u-s-i-n-e-s-s-.-c-a-.-g-o-v-/-A-b-o-u-t-U-s-.-a-s-p-x).

States also cooperate. There are many opportunities for officials in one state to seek the

advice of those in other states with respect to policy alternatives or new administrative

arrangements. Many organizations, including the Council of State Governments, the National

Governors Association, the National Council of State Legislators, and groups that bring together state officials in personnel, budgeting, purchasing, social welfare, health, and so

forth, have been created to help officials share information and expertise. These groups,

along with the Washington offices 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 fifty states. Originally used to resolve boundary disputes, interstate compacts today

cover a wide variety of topics, most arising from the fact that today's policy problems do not

confine 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 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 find 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, Nevada, and other

southwestern states have a definite interest in ensuring access to water from the Colorado River. The states' governments 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 federal 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 classified 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 example, 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 final means of chartering cities, called home rule, permits cities

to write their own charters, within very broad state guidelines and generally subject to voter

approval.

Home rule obviously provides the greatest flexibility 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, with most of that

targeted for education and lesser amounts for welfare, highways, and other purposes (U.S.

Census, -w-w-w-.-c-e-n-s-u-s-.-g-o-v-/-g-o-v-s-/-w-w-w-/-e-s-t-i-m-a-t-e-.-h-t-m-l). But more severe economic times have led to a change in direction, as many states have sought to

balance their own budgets by decreasing aid to local governments. For example, in 2011,

Governor John Kasich (R) of Ohio proposed cutting aid to local governments by up to 50

percent and limiting state colleges and universities to 3.5 percent tuition increases. The cuts

would cost counties, municipalities, and townships $167 million in the first year, an amount

local officials described as “devastating.”

What Would You Do?

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?

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

provide 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 governments to assume new responsibilities. In most states, there are twenty to thirty statutes that impose

substantial financial burdens on local governments. The total number of mandates or

regulations may number in the thousands (Berman, 1992, p. 53).

Just as states complain about federal mandates, many local officials view state mandates as unnecessary intrusions on local prerogatives. The mandates may require local expenditures

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 jails, to say nothing of the additional financial

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 reimbursements

of expenses created by mandates.

Localities are not powerless in their relationship with the states, especially as they constitute

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 legislature.

Moreover, various patterns of state/local cooperation have emerged in the past several years. Many states, for example, have developed state-level commissions on

intergovernmental relations. These state commissions bring together state and local officials

to discuss problems in the intergovernmental system and devise ways to work together

more effectively. Among the recommendations that have emerged are suggestions 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, relationships 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 difficult 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.

But many interlocal problems are resolved at the local level. Natural, though informal, patterns of cooperation develop, especially in the relationships among local professionals.

The police chief in one community talks with other police chiefs, the health officer talks with

other health officers, and so on. More formally, one government may actually purchase

services from another, contracting for police or fire protection, wastewater treatment, or trash collection. Los Angeles County, for example, provides a variety of services to 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 have started to share technological innovations across

jurisdictions. 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 that Sunnyvale

has created a public-private partnership with a management firm and its e-government

affiliate to market the application to other local authorities that are interested in enhancing

their efficiency and responsiveness (Eggers, 2007; Mariani, 2001).

Finally, special districts may be created to solve problems that cross governmental

boundaries. As mentioned in Chapter 2, special districts are local governments created for a specific purpose within a specific 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 difficulty figuring out which government can help with a particular problem. The

difficulties in coordinating efforts are substantial, as are the problems of holding the various

governments accountable.

Working with Nongovernmental Organizations It is impossible to speak of intergovernmental relations without discussing the role of

nongovernmental organizations (NGOs) in the policy process. Nonprofit, for-profit, 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 for their

growing influence 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 inflation constant, but government employment grew only

about 25 percent, with practically no significant growth in the last twenty-five 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 firms, such as defense contractors or banks that administer school loan

programs, and to nonprofit organizations, especially those that provide human services such

as care for the homeless or disabled.

FIGURE 3.3

Federal Spending and Payroll, 1970–2004 (in Billions of Dollars)

SOURCE (numbers):

http;//-w-w-w-.-w-h-i-t-e-h-o-u-s-e-.-g-o-v-/-o-m-b-/-b-u-d-g-e-t-/-f-y-2-0-0-8-/-p-d-f-/-h-

i-s-t-.-p-d-f; and

https://-w-w-w-.-o-p-m-.-g-o-v-/-f-e-d-d-a-t-a-/-f-a-c-t-b-o-o-k-/-2-0-0-5-/-f-a-c-t-b-o-o-k-

2-0-0-5-.-p-d-f (p. 62).

Much of the attention on NGOs tends to focus on the nonprofit sector, which we will discuss

later in this chapter, but for-profits 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 significant blurring between sector lines, with only

vague distinctions between for-profit firms and government agencies. Such involvement of

private-sector firms in public programs, of course, isn't completely new. Defense and aerospace companies have contracted with government for decades, and for-profit prisons

were actually the norm in the nineteenth century. In fact, many of our technological

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 previously 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 firm 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 firms to bring public school classrooms into

the information age. In each case, the interorganizational relationships that arise are important to the success or failure of public programs.

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 find more efficient ways to

conduct the public's business. Both motives have been discussed under the heading 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.

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, firms, 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

petroleum 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, people

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 firm operates more efficiently.

Networking

To trace some innovative practices in government, check out the Alliance for Innovation at http;//-t-r-a-n-s-f-o-r-m-g-o-v-.-o-r-g and the Ash Institute for Democratic Governance and

Innovation at Harvard University's Kennedy School of Government program at

-w-w-w-.-a-s-h-i-n-s-t-i-t-u-t-e-.-h-a-r-v-a-r-d-.-e-d-u-/-A-s-h-/-i-n-d-e-x-.-h-t-m. For innovations in nonprofit organizations, see the Leader to Leader material at

http;//-w-w-w-.-h-e-s-s-e-l-b-e-i-n-i-n-s-t-i-t-u-t-e-.-o-r-g-/.

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. For example, a federal agency might

decide to contract with a private firm rather than handle computer programming itself; a

state might contract with a nonprofit organization to deliver services to welfare recipients;

or a local government might lease a public hospital to a private firm. 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-

profit or nonprofit agency.

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 the box “Take

Action: Taking Contracting Seriously”). Supporters view fee-for-service and similar

arrangements with NGOs as a more efficient method of service delivery, given the greater flexibility, different labor costs, and economies of scale offered by for-profit and nonprofit

organizations. Some of the most publicized 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.

For example, the state of Kansas used contracts to hand over most of its child welfare

services to the private sector. Several years ago, government officials 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 Representative Melvin Neufeld, who played a

key part in drafting the reform legislation. Excessive costs and declining effectiveness on the

part of government agencies, coupled with newly elected conservative state leadership,

prompted state officials to shift virtually the entire system of service delivery over to NGOs,

mostly for-profit firms. 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 officials act mainly to administer the contracts and ensure standards for

service quality (Gurwitt, 2000, p. 40).

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 the savings and performance improvements they are likely to produce.

• train contracting people, especially those developing contract requirements and

doing contract management, in the 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 after the award

has been granted.

• 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: Donald F. Kettl and Steven Kelman, “Reflections on 21st Century Government

Management,” IBM Center for The Business of Government (2008 Presidential Transition

Series);

http;//-w-w-w-.-b-u-s-i-n-e-s-s-o-f-g-o-v-e-r-n-m-e-n-t-.-o-r-g-/-r-e-p-o-r-t-/-r-e-f-l-e-c-t-i-

o-n-s---2-1-s-t---c-e-n-t-u-r-y---g-o-v-e-r-n-m-e-n-t---m-a-n-a-g-e-m-e-n-t (p. 45).

But privatization of human services has its challenges. Even as supporters point to success

stories, a closer look reveals major problems relating to sustainability. For example, next

door to its thriving effort to supply welfare services in West Palm Beach, Lockheed Martin

IMS struggled in Miami-Dade County. Although the company's costs exceeded $38 million in

the same fiscal year, it failed to make a significant 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).

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 firms whose primary motive is profit, but also from the businesses themselves. Governing magazine

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 officials 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 officials struggled to learn new roles as contract managers rather than

caregivers. For private firms, the reforms opened a floodgate on newly created service networks

and swamped many businesses that simply did not have the expertise or capacity to deal with

the increased demands of public welfare programs (Cohen & Eimicke, 2008).

A more recent example of the difficulties of contracting for services concerns federal

spending for grants and contracts in wartime. A bipartisan Commission on Wartime

Contracting, which submitted its report in August 2011, found that at least one out of every

six dollars of U.S. spending for grants and contracts in Iraq and Afghanistan has been wasted.

“Tens of billions of taxpayer dollars have been wasted through poor planning, vague and

shifting requirements, inadequate competition, substandard contract management

oversight, lax accountability, weak interagency coordination, and s0ubpar performance or outright misconduct by some contractors and federal employees” (“Reducing Waste and

Wartime Contracts,” 2011). The Department of Defense reported to the commission that the

United States simply can't conduct prolonged military operations without contractor

support, and indeed, the number of contractors in Iraq and Afghanistan has approximately equaled the number of U.S. military forces. But the commission concluded that poor

planning, bad management, and weak accountability needed to be corrected in order to save

money and produce more economical and effective outcomes.

States as well have continued to explore privatization through contracts and other devices.

New Jersey governor Chris Christie created the state Privatization Task Force to explore

opportunities for privatization but also to consider potential difficulties. The task force

explored privatization efforts in other states, noting that Philadelphia mayor Ed Rendell

saved $275 million by privatizing forty-nine city services. The task force identified similar

savings as possible in New Jersey, but it also noted that care must be taken in the process of

privatization. While the government has increasingly served as a broker of services, that new

role bears special responsibilities. “The report took careful note of another key factor: the

states most successful in privatization created a permanent, centralized entity to manage

and oversee the operation, from project analysis and vendor selection to contracting and

procurement. For governments that forgo due diligence, choose ill-equipped contractors and fail to monitor progress, however, outsourcing deals can turn into costly disasters” (“The

Pros and Cons of Privatizing,” 2010).

Contracts used to provide public services certainly have promise; however, alliances with

NGOs may not always be effective. 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 firm to perform a certain service within a state or locality. The firm charges citizens

directly for the services it provides. Typically, rates and performance standards are established

by the government, and there is often some continuing regulation of the firm. Examples include electric power, taxi services, cable television, and emergency ambulance services. Similarly,

governments may provide grants or subsidies to private or nonprofit organizations that are

performing needed public services. The government provides full or partial support for

activities that will benefit the community but that the local government, for financial 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 coupons

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, efficient options than the public

schools, the issue has become one of the most controversial topics in current education

policy.

Increased privatization means that public officials need to be attentive to the process of

contracting for services. In the words of Ruben Berrios (2006), “The government purchases

the expertise of private firms to provide services. The goal is to create a more effective and

efficient delivery through a system that fosters and creates competition, provides better

management, and helps reduce the size of the government” (p. 119). Although government contracts are not new, they create new relations between government organizations and

private or nonprofit 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 officer

who is ultimately authorized to negotiate for the needs of the community and then to commit 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 operate 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 partnerships,

where the term “partnership” indicates more than cooperation. These partnerships may include long-term agreements for activities that are inherently considered governmental,

such as commercial operation of prisons, or for including contractors in rulemaking policy

procedures (Cooper 2003, p. 57). Public-private partnerships and alliances operate between

government agencies and for-profit companies and between government agencies and nonprofit organizations. Nonprofit organizations are a convenient choice for governments

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, volunteers in these organizations often deliver public services for lower costs than if these services were

provided by government agencies. However, government grants to nonprofit organizations

impose additional administrative requirements for these organizations, frequently 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 officials. When entering a partnership with a

for-profit company, public managers should be aware that these companies operate for

making profit. “Whatever else is promised, the most common way in which for-profit firms seek to make money on government contracts for the same amount of 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

flaws that complement the contracting process: favoritism for companies that already have

contracts with the government, preferences for large firms over small firms, and corrupt

behavior of the government officials 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 nonprofit sector, traditional mechanisms for control and accountability may not work.

Maintaining a proper concern for democratic values such as equity and responsiveness may, in the long run, prove more difficult than the managerial challenges of creating appropriate

interorganizational policy networks.

The Management of Nonprofit Organizations 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 those in the nonprofit sector. In

order to develop more effective interorganizational, cross-sector relations, it may be helpful

to identify some of the key elements of organizational capacity within nonprofits.

Operational Leadership

Nonprofit management begins with effective leadership. By leadership, we mean an

organization'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 nonprofits starts with forging a sound mission and

vision. The mission represents the purpose the organization will serve in its community. 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 nonprofits. Independent-sector groups depend on a lot more than paid staff to carry out organizational objectives, including

volunteers, donors, board members, and other resources. Without a strong sense of purpose

or a clear vision for the future, nonprofit leaders will find it extremely difficult to build the

“critical mass” necessary for success.

Of course, setting a mission and vision must be combined with sound planning—in

particular, with the establishment of clear, measurable goals and objectives. A recent survey

of nonprofits found that the “level of support and commitment to planning by the leadership

of the organization 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 budgeting 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).

Networking

To explore some of the aspects of nonprofit management, go to the Aspen Institute at

-w-w-w-.-a-s-p-e-n-i-n-s-t-i-t-u-t-e-.-o-r-g; and the Hauser Center for Nonprofit

Organizations at Harvard University at -w-w-w-.-k-s-g-h-a-u-s-e-r-.-h-a-r-v-a-r-d-.-e-d-u. See

Chapter 2 for a list of sites relating to the advocacy role of nonprofit organizations.

Leadership also involves building a solid organizational foundation that allows nonprofits to

transform their strategy into action. For those working in the charitable sector, this often

proves to be the most difficult task. Most nonprofits begin with an idea that 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 nonprofits involves creating

effective, high-capacity systems of operation. Much of this challenge stems from an

unwillingness on the part of government and foundation grant makers to provide funding

for administrative costs. Nonprofit agencies could gain access to resources for programming and service delivery, but they struggled to find 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 financial support, resource development represents another key element of

nonprofit 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 nonprofit

organizations registered with the IRS, nearly half have collected more than $25,000 in gross receipts. They reported more than $299 billion in revenues from charitable contributions

during 2004, with 83 percent from individual contributions, 11 percent from private

foundations, and 5 percent from corporations (The Nonprofit Sector in Brief, 2007).

These figures 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 nonprofits (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

nonprofits, on the other hand, diversify their revenue streams, balancing between grants, fees-for-service, and other sources.

Nonprofit organizations that are classified as either a public charity or private foundation

under IRC 501(c)(3) benefit from their tax-exempt status, which allows taxpayers to deduct contributions as charitable donations. Some nonprofits also may receive discounts on postal

rates, special provisions for financing, and various exemptions from state and local taxes.

To ensure sustainability, many nonprofits and their associations have developed innovative

strategies for maintaining a sound financial 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 charitable

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 nonprofits from around a given community. Prospective donors are asked to work directly with the planned giving officers of the foundations or with estate planners to

decide upon a charitable beneficiary.

As any nonprofit manager will tell you, resource development goes well beyond grants and

other types of financial contributions. Although most people recognize the challenge nonprofits 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

certainly remains central to a nonprofit organization's balance sheet, more and more

nonprofits 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 has declined in recent years, more Americans are

volunteering than ever before. In 2004, about 65 million volunteered in charitable organizations

(http;//-w-w-w-.-u-r-b-a-n-.-o-r-g-/-U-p-l-o-a-d-e-d-P-D-F-/-3-1-1-3-7-3-_-n-o-n-p-r-o-f-t-_

-s-e-c-t-o-r-.-p-d-f).

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 nonprofit also depends on sound financial management. The benefits of being a charitable organization were discussed previously, but with these benefits come important

requirements for accounting and public disclosure of financial transactions. For example, all

IRC 501(c)(3) organizations must maintain open records and prepare financial 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 disclosure statements to state and local tax authorities.

To satisfy these requirements, nonprofits must maintain detailed financial records. At the

very least, this includes following basic accounting standards and procedures. But financial

management includes much more than reporting. It should be at the heart of a nonprofit's strategic planning and management. Without the ability to generate clear, meaningful

financial information and incorporate this information into organizational decision making,

a nonprofit agency limits its overall capacity. Unfortunately, many nonprofits fail to follow

established procedures, and some do not have in place even the simplest mechanisms for

accounting. Small- to medium-sized nonprofits have the greatest need in this area.

The basics of financial management include monitoring the assets, liabilities, and net assets

of the organization, as well as the revenues and expenses for established reporting periods. Moreover, nonprofit managers should make sure that the budget and financial 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 organization's financial condition.

Board Governance

Most of the principles of nonprofit management discussed here have focused on the operational side of the organization. However, independent-sector agencies also must have

an effective governance system. Nonprofit 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 final

decision-making body of the organization. By law, board members are bound (in the articles

of incorporation) to ensure the fiscal 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

overseeing organizational planning and implementation (Carver & Carver, 1996; Eadie,

2001). 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

reflected in organizational action. An excellent example can be seen in Porter Hills

Retirement Communities and Services, a nonprofit 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 reflect 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 factors

affecting the organization.

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 nonprofit 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.

Nonprofit boards vary in size, with some organizations having fewer than ten members and

others having more than fifty members (which is toward the extreme!). The composition of the board will reflect the history and mission of the organization, but most nonprofits strive

to ensure that the governance system will reflect 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 sufficient individuals on the board to participate on board committees?

(Smith, Bucklin & Associates, 2000, p. 29)

Boards are perhaps one of the most important components of effective nonprofit

management. A high-impact board with an effective board chairperson can have an extraordinary influence on the organization's success. Unfortunately, the opposite is also

true. Many a good nonprofit has been severely limited, and in some cases completely

destroyed, because of an ineffective, divisive board.

Board-Staff Relations

Among the greatest challenges faced by nonprofits 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

micromanage the operational staff. This does little more than foster distrust and frustration, and, in many cases, it contributes to high staff turnover.

There are several keys to effective relationships. First, the board must set clear expectations

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 director.

Although some executive directors 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

executive directors 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 nonprofit management. This stems from the fact that the federal

tax code limits lobbying activities by charitable organizations, and, depending on the party

affiliation or political position, some legislators and policy makers have frowned upon

nonprofit activism. But nonprofit 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 nonprofits the right to lobby in the public interest without having

to worry about losing their status as tax-exempt organizations (Pub. L. 94–455,1307 [1976], now codified under Section 501(c) of the federal tax code). 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 nonprofits. Under the 1976 tax law, nonprofits that choose to come under

its jurisdiction must comply with the definition of lobbying as “the expenditure of money by the organization for the purpose of attempting to influence 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 officials on matters concerning

legislation in which they have a role to play or with the nonprofit organization's own

membership. In grassroots lobbying, the organization influences the legislative process by

attempting to sway public opinion on policy issues. The tax law also establishes ceilings for

expenditures that may be allocated to lobbying, based on the total level of tax-exempt

expenditures for the organization.

As future nonprofit managers, you should explore the legal constraints before engaging in lobbying activities, but by no means should you shy away from attempting to influence 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.

Summary 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 nonprofit—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 interests

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.

To make that judgment, you will need to consider several factors. The first is

communications, 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 personnel 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

government official responsible for a given program must be skilled in negotiating relationships with those outside the agency to ensure that the program proceeds effectively

and responsibly. 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

“managing in ambiguity” and “negotiating organizational boundaries.” The interorganizational nature of public administration today has a direct effect on what skills

managers need.

STUDY QUESTIONS 6. Although intergovernmental relations involve more than financial matters, funding

programs have a significant role in the process. Define and give examples of the

various kinds of grants and funding programs.

7. Compare and contrast dual federalism, cooperative federalism, and coercive federalism. Describe the approach to federalism used during the Clinton and Bush

presidencies. How would you characterize the Obama approach?

8. In the last decade, states and localities have faced significant changes in funding from

the federal government. Discuss the reasons for the changes and how they affect

relations among the various levels.

9. How do governmental mandates and regulations affect operations at the state and

local levels? 10. Government has been moving to “privatization” of some goods and services. How will

this trend affect intergovernmental relations?

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

CASES AND EXERCISES 12. 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?

13. 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

community 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.

14. The agency group must first define as clearly as possible the intent of the legislation

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 (including a

deadline for applications).

15. 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

communicate 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.

16. Following the exercise, the class as a whole should discuss the entire process. You

might want to focus on issues such as these:

o What is the role of the agency in defining the kinds of projects that will be

funded?

o What types of instructions are necessary to enable communities to compete

fairly and effectively? o What was most attractive about the proposals that were funded?

o For what reasons were other proposals not funded?

o What effect on the final decisions did communications between the

community and the liaison from the agency have?

o Did “politics” play any role?