Will The 2008 Election Improve State-Federal Relations?

Here’s a crucial question for the presumed presidential nominees – Republican John McCain and Democrat Barack Obama – and all the candidates for the next Congress. Are you happy with the status quo in federal-state relations?

States have long served as laboratories for creating and testing policies and programs that drive positive change nationally. Yet for more than a decade, the federal-state relationship has been under stress. Looking forward, the nation faces many challenges, and states can play a key role in providing leadership. However, whether governors and states provide separate, independent leadership or leadership within a stronger federal-state partnership will depend on which brand of federalism the next administration and Congress adopt.

Cooperation vs. Coercion

Federalism scholars often point to two recent periods in which federalism was defined very differently. Between 1980 and 1996, there was “cooperative” federalism, an era ushered in by the Reagan administration and marked by a genuine partnership between states and the federal government. President Reagan engaged in discussions and negotiations with the nation’s governors over a huge swap proposed for domestic programs in which the federal government would take responsibility for all Medicaid and states would take responsibility for transportation and other domestic issues. Although this dialogue did not lead to any major legislative changes, both sides embraced a real federal-state partnership.

Cooperative federalism continued through the early years of the Clinton administration, which saw passage of the Unfunded Mandates Reform Act in 1995, and welfare reform in 1996. Both the Republicans in Congress and the Democratic president worked cooperatively with governors to enact these two bills. Welfare reform not only turned an individual entitlement program into a block grant, but it also gave states substantial authority to tailor the program to the needs of their citizens.

From the mid-1990s through the present, we have been in a period of “coercive federalism,” where the federal government more often just tells the states what to do. It does not ask for advice or enter into serious negotiation with the states. The best example is the Real ID legislation, enacted in 2005. This law, which in essence requires states to convert their driver’s licenses into de facto national ID cards, will cost states more than $4 billion to implement and is being opposed by a significant number of state legislatures. Despite the fact that they will bear the brunt of the costs, states were not consulted about how the requirements could impact them or how best to build new security features into their existing systems for issuing licenses and IDs.

Federalism by Default

While it is always risky to look into the crystal ball, I sense that we are at a major turning point in the role of the states in our intergovernmental system. Essentially, the long-term trend of increased centralization of authority in Washington, D.C., may slow dramatically or even be reversed. Two reasons will drive this change.

First, the next administration and Congress will have to focus more on international issues, ranging from the wars in Iraq and Afghanistan, to terrorism, to Iran and North Korea and to global economic issues such as the price of oil and other commodities and the value of the dollar?all in an increasingly fragile international financial system. In short, the next administration and Congress will face huge international challenges that could dominate the agenda.

Second, on many of the domestic issues such as health care, energy and climate change, states and governors have been providing national leadership over the last decade.

Health Care Reform – During the last several years, Vermont and Maine have enacted universal access while Massachusetts has enacted universal coverage. Overall, about 35 states have enacted major reforms, including coverage expansions, insurance market reforms, small business pools, and disease management. They also are focusing on quality improvement and the development of electronic data exchange to improve the efficiency and quality of patient care.

Energy – Governors are leading efforts to conserve energy resources while also seeking to diversify supplies by expanding renewable resources, including biomass, geothermal, hydropower, solar and wind. Many of these efforts also would reduce greenhouse gas emissions. In addition, states are setting renewable portfolio standards for public utilities and are establishing renewable fuel standards for transportation and heating fuels. Other states are upgrading new building standards and setting standards for state automobile fleets and state government buildings.

Climate Change – There are now three major regional climate change initiatives, which when fully implemented would cover about one-half the population of the United States. The Regional Greenhouse Gas Initiative (RGGI) will reduce carbon-dioxide emissions for power plants in 10 Northeast and Mid-Atlantic states through a regional, mandatory market-based cap-and-trade program. Meanwhile, Arizona, California, New Mexico, Oregon and Washington have formed the Western Climate Initiative (WCI). Since WCI’s founding, the governors of Utah and Montana, and the premiers of British Columbia and Manitoba and Quebec, Canada, have joined. The third agreement – the Midwestern Greenhouse Gas Reduction Accord – was signed in November 2007 by the governors of nine Midwestern states and the premier of Manitoba, Canada.

A New Partnership

As the next president and Congress begin to set an agenda for 2009, it is critical that they understand both the shift in responsibilities that has taken place over the last decade on domestic issues, as well as the role states can play in helping move the country forward. They should build on states’ leadership and expertise on the major domestic issues. The good news is that states have shown a real policy path on these domestic issues; the bad news is that states could become an obstacle if the federal government continues a coercive approach to federalism.

Essentially, the federal government should establish the policy framework, then provide incentives for states to implement the policies with considerable flexibility. Such an approach would use state expertise and leadership to their full potential. Although this may mean less uniformity across states in policies and programs, it will result in more adaptable solutions to domestic challenges and perhaps a stronger national consensus on policy. Most of all, it would help the next Congress and next administration actually deliver to the American people comprehensive legislation on health care, energy and climate change.

Raymond C. Scheppach, Ph.D., is the executive director of the National Governors Association. The views expressed here are those of the author and do not necessarily represent those of the National Governors Association.