Conditional Grants-in-Aid

Conditional Grants-in-Aid (Scope of Power to Tax)

It was not until 1947 that the right of Congress to impose conditions upon grants-in-aid over the objection of a state was squarely presented.1 The Court upheld Congress's power to do so in Oklahoma v. Civil Service Commission. 2 The state objected to the enforcement of a provision of the Hatch Act that reduced its allotment of federal highway funds because of its failure to remove from office a member of the State Highway Commission found to have taken an active part in party politics while in office. The Court denied relief on the ground that, “[w]hile the United States is not concerned with, and has no power to regulate local political activities as such of state officials, it does have power to fix the terms upon which its money allotments to states shall be disbursed. . . . The end sought by Congress through the Hatch Act is better public service by requiring those who administer funds for national needs to abstain from active political partisanship. So even though the action taken by Congress does have effect upon certain activities within the state, it has never been thought that such effect made the federal act invalid.” 3

More about Conditional Grants-in-Aid

The general principle is firmly established. “Congress has frequently employed the Spending Power to further broad policy objectives by conditioning receipt of federal moneys upon compliance by the recipient with federal statutory and administrative directives. This Court has repeatedly upheld against constitutional challenge the use of this technique to induce governments and private parties to cooperate voluntarily with federal policy.” 4

Conditional Grants-in-Aid: Developments

The Court has set forth several standards purporting to channel Congress's discretion in attaching grant conditions.5 To date only one statute, discussed below, has been struck down as violating these standards, although several statutes have been interpreted so as to conform to the guiding principles. First, the conditions, like the spending itself, must advance the general welfare, but the determination of what constitutes the general welfare rests largely if not wholly with Congress.6 Second, because a grant is “much in the nature of a contract” offer that the states may accept or reject,7 Congress must set out the conditions unambiguously, so that the states may make an informed decision.8 Third, the Court continues to state that the conditions must be related to the federal interest for which the funds are expended,9 but it has never found a spending condition deficient under this part of the test.10 Fourth, the power to condition funds may not be used to induce the states to engage in activities that would themselves be unconstitutional. 11 Fifth, the Court has suggested that in some circumstances the financial inducement offered by Congress might be so coercive as to pass the point at which “pressure turns into compulsion.” 12 Certain federalism restraints on other federal powers seem not to be relevant to spending conditions.13

Other Aspects

In 2010, Congress passed the Patient Protection and Affordable Care Act (ACA),14 which established a comprehensive health care system for the United States. As part of this new system, the Act expanded which persons were eligible for Medicaid, which is financed jointly by the federal and state governments. Failure of a state to implement such expansion could, in theory, have resulted in the withholding of all Medicaid reimbursements, including payments for persons previously covered by the Medicaid program. In National Federation of Independent Business (NFIB) v. Sebelius,15 seven Justices (in two separate opinions) held that the requirement that states either comply with the requirements of the Medicaid expansion under the ACA or lose all Medicaid funds violated the Tenth Amendment.16 The Court held, however, that withholding of just the funds associated with that expansion raised no significant constitutional concerns, essentially making the Medicaid expansion voluntary.

Other Issues

Chief Justice Roberts' controlling opinion 17 in NFIB held that the ACA Medicaid expansion created a “new” and “independent” program. 18 As Congress's power to direct state activities under the Spending Clause is in the nature of a contract, Justice Robert's opinion suggests that the only changes that could be made to Medicaid would be those that could be reasonably anticipated by the states as they entered the original program, when only four categories of persons in financial need were covered: the disabled, the blind, the elderly, and needy families with dependent children. The Medicaid expansion arguably changed the nature of the program by requiring recipient states, as part of a universal health care system, to meet the health care needs of the entire nonelderly population with income below 133% of the poverty level.19 Thus, the Medicaid expansion “accomplishe[d] a shift in kind, not merely degree.” 20

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Once Justice Roberts established that the Medicaid expansion was a “new” and “independent” program, he then turned to whether withdrawal of existing Medicaid funds for failure to implement the expansion was coercive. Justice Roberts noted that the threatened loss of Medicaid funds was “over 10 percent of most State's total revenue,” which he characterized as a form of “economic dragooning” which put a “gun to the head” of the states.21 Justice Roberts contrasted this amount with the amount of federal transportation funds threatened to be withheld from South Dakota in Dole, which he characterized as less than half of one percent of South Dakota's budget. How courts are to consider grant withdrawals between 10 percent and one-half of 1 percent, however, is not addressed by the Roberts' opinion, and Justice Roberts declined to speculate where such a line would be drawn.

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If a state accepts federal funds on conditions and then fails to follow the requirements, the usual remedy is federal administrative action to terminate the funding and to recoup funds the state has already received.22 Although the Court has allowed beneficiaries of conditional grant programs to sue to compel states to comply with the federal conditions,643 more recently the Court has required that any such susceptibility to suit be clearly spelled out so that states will be informed of potential consequences of accepting aid. Finally, it should be noted that Congress has enacted a range of laws forbidding discrimination in federal assistance programs,24 and some of these laws are enforceable against the states.25

Resources

References

This text about Conditional Grants-in-Aid is based on “The Constitution of the United States of America: Analysis and Interpretation”, published by the U.S. Government Printing Office.

[Footnote 1] In Steward Machine Company v. Davis, it was a taxpayer who complained of the invasion of state sovereignty, and the Court put great emphasis on the fact that the state was a willing partner in the plan of cooperation embodied in the Social Security Act. 301 U.S. 548, 589, 590 (1937).

[Footnote 2] 330 U.S. 127 (1947).

[Footnote 3] 330 U.S. 127, 143 (1947). This is not to say that Congress may police the effectiveness of its spending only by means of attaching conditions to grants; Congress may also rely on criminal sanctions to penalize graft and corruption that may impede its purposes in spending programs. Sabri v. United States, 541 U.S. 600 (2004).

[Footnote 4] Fullilove v. Klutznick, 448 U.S. 448, 474 (1980) (Chief Justice Burger's opinion for the Court cited five cases to document the assertion: California Bankers Ass'n v. Shultz, 416 U.S. 21 (1974); Lau v. Nichols, 414 U.S. 563 (1974); Oklahoma v. Civil Service Comm'n, 330 U.S. 127 (1947); Helvering v. Davis, 301 U.S. 619 (1937); and Steward Machine Co. v. Davis, 301 U.S. 548 (1937).

[Footnote 5] See South Dakota v. Dole, 483 U.S. 203, 207-12 (1987).

[Footnote 6] 483 U.S. at 207 (1987). See discussion under Scope of the Power, supra.

[Footnote 7] Barnes v. Gorman, 536 U.S. 181, 186 (2002) (holding that neither the Americans With Disabilities Act of 1990 nor section 504 of the Rehabilitation Act of 1973 subjected states to punitive damages in private actions).

[Footnote 8] South Dakota v. Dole, 483 U.S. at 207. The requirement appeared in Pennhurst State School & Hosp. v. Halderman, 451 U.S. 1, 17 (1981). See also Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 246 (1985) (Rehabilitation Act does not clearly signal states that participation in programs funded by Act constitutes waiver of immunity from suit in federal court); Gonzaga Univ. v. Doe, 536 U.S. 273 (2002) (no private right of action was created by the Family Educational Rights and Privacy Act); Arlington Central School Dist. Bd. of Educ. v. Murphy, 548 U.S. 291 (2006) (because Individuals with Disabilities Education Act, which was enacted pursuant to the Spending Clause, does not furnish clear notice to states that prevailing parents may recover fees for services rendered by experts in IDEA actions, it does not authorize recovery of such fees).

[Footnote 9] South Dakota v. Dole, 483 U.S. at 207-08. See Steward Machine Co. v. Davis, 301 U.S. 548, 590 (1937); Ivanhoe Irrigation Dist. v. McCracken, 357 U.S. 275, 295 (1958).

[Footnote 10] The relationship in South Dakota v. Dole, 483 U.S. at 208-09, in which Congress conditioned access to certain highway funds on establishing a 21-years-of-age drinking qualification was that the purpose of both funds and condition was safe interstate travel. The federal interest in Oklahoma v. Civil Service Comm'n, 330 U.S. 127, 143 (1947), as we have noted, was assuring proper administration of federal highway funds.

[Footnote 11] South Dakota v. Dole, 483 U.S. at 210-11.

[Footnote 12] Steward Machine Co. v. Davis, 301 U.S. 548, 589-90 (1937); South Dakota v. Dole, 483 U.S. 203, 211-12. See North Carolina ex rel. Morrow v. Califano, 445 F. Supp. 532 (E.D.N.C. 1977) (three-judge court), aff'd 435 U.S. 962 (1978).

[Footnote 13] South Dakota v. Dole, 483 U.S. at 210 (referring to the Tenth Amendment: “the 'independent constitutional bar' limitation on the spending power is not . . . a prohibition on the indirect achievement of objectives which Congress is not empowered to achieve directly”).

[Footnote 14] Pub. L. 111-148, as amended.

[Footnote 15] 567 U.S.___, No. 11-393, slip op. (2012).

[Footnote 16] Chief Justice Robert's opinion was joined by Justices Breyer and Kagan on this point, while Justices Scalia, Kennedy, Thomas and Alito made a similar point in a joint dissenting opinion. The authoring Justices of the two opinions, however, did not join in either the reasoning or judgment of the other opinion.

[Footnote 17] “When a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds.' ” Marks v. United States, 430 U.S. 188, 193 (1977) (citation omitted). Justice Roberts opinion is arguably narrower than the dissent, because, as discussed below, his opinion found a constitutional violation based on the presence of both a “new” “independent” program and a coercive loss of funds, while the dissenting opinion would have found the coercive loss of funds sufficient. NFIB, 567 U.S.___, slip op. at 38-42 (Justices Scalia, Kennedy, Thomas and Alito dissenting).

[Footnote 18] 567 U.S.___, slip op. at 50, 53-54. It might be argued that the Roberts' opinion, with its emphasis on “new” and “independent” programs, is implicitly addressing the “relatedness” inquiry of South Dakota v. Dole. Justice Roberts' opinion, however, does not explicitly discuss the issue, and an argument can be made that there is a significant difference between the two inquiries. As noted, the “relatedness inquiry” in Dole was identified as a limitation on the Spending Clause, while the NFIB discussion of “new” and “independent programs” emphasized the concerns of the Tenth Amendment. Second, under Dole, the “relatedness” and “coercion” inquiries appear to be disjunctive, in that failure to comply with either of these factors would mean that the statute was unconstitutional. Under NFIB, however, the “new” and “independent” program inquiry and the “coercion” inquiry appear to be conjunctive, so that a grant condition must apparently fail both tests to be found unconstitutional.

[Footnote 19] Justice Roberts also noted that Congress created a separate funding provision to cover the costs of providing services to any person made newly eligible by the expansion, and mandated that newly eligible persons would receive a level of coverage that is less comprehensive than the traditional Medicaid benefit package.

[Footnote 20] 567 U.S.___, slip op. at 53.

[Footnote 21] 567 U.S.___, slip op. at 10, 51-52.

[Footnote 22] Bell v. New Jersey, 461 U.S. 773 (1983); Bennett v. New Jersey, 470 U.S.

[Footnote 23] (1985); Bennett v. Kentucky Dep't of Education, 470 U.S. 656 (1985).$$643 E.g., King v. Smith, 392 U.S. 309 (1968); Rosado v. Wyman, 397 U.S. 397 (1970); Lau v. Nichols, 414 U.S. 563 (1974); Miller v. Youakim, 440 U.S. 125 (1979). Suits may be brought under 42 U.S.C. § 1983, see Maine v. Thiboutot, 448 U.S. 1 (1980), although in some instances the statutory conferral of rights may be too imprecise or vague for judicial enforcement. Compare Suter v. Artist M., 503 U.S. 347 (1992), with Wright v. Roanoke Redevelopment & Housing Auth., 479 U.S. 418 (1987).

[Footnote 24] E.g., Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d; Title IX of the Educational Amendments of 1972, 20 U.S.C. § 1681; Title V of the Rehabilitation Act of 1973, 29 U.S.C. § 794.

[Footnote 25] Here the principal constraint is the Eleventh Amendment. See, e.g., Board of Trustees of Univ. of Ala. v. Garrett, 531 U.S. 356 (2001) (Americans with Disabilities Act of 1990 exceeds congressional power to enforce the Fourteenth Amendment, and violates the Eleventh Amendment, by subjecting states to suits brought by state employees in federal courts to collect money damages).

Tables of Contents

• Conditional Grants-in-Aid and other Topics in the Contents – Article 1 of the U.S. Constitution
• U.S. Constitutional Law Category
• List of amendments to the U.S. Constitution
• Conditional Grants-in-Aid and other Topics in the Constitution Contents
• Interpretation of the U.S. Constitution (Table of Contents)
• Clauses of the Constitution (Table of Contents)