Money plays a key role in the federal government’s relationship with the
states. Congress gives money to the states, for example, but stipulates how this
money should be used in order to force the states to cooperate with federal
policies.
Federal Aid to the States
Since World War II, states have come to rely heavily on federal money.
Likewise, the national government has also relied on the states to administer
some federal policies, a practice called fiscal federalism. The
term grants-in-aid refers to the federal government giving money to
the states for a particular purpose. There are two general types of
grants-in-aid:
-
Block grants: Money given for a fairly broad purpose with
few strings attached.
-
Categorical grants: Money given for a specific purpose
that comes with restrictions concerning how the money should be spent. There
are two types of categorical grants:
-
Project grants: Money states apply for by submitting
specific project proposals
-
Formula grants: Money given to states according to a
mathematical formula
Example: When the Republicans retook
Congress in 1994, they changed many federal grants into block grants.
Instead of giving money to states to buy textbooks or repair schools, for
example, Congress gave states blocks of money to spend on education in any
way the states saw fit.
Federal Pressure on the States
The federal government uses a number of tactics to compel states to follow
its policies and guidelines. Congress can order states to comply but usually
applies pressure more subtly by threatening to withhold funds from disobedient
states.
