Intergovernmental Relations: The Future Is Now

Intergovernmental Relations: The Future Is NowToward a Functioning Federalism by David B. Walker; Explaining America: The Federalist byGarry Wills; The Politics of Federal Grants by George E. Hale; Marian Lief Palley; ManagingFederalism: Evolution and Development of the Grant-in-Aid System by Raymond A. Shapek;COUPE Papers on Public Economics-Fiscal Federalism and Grants-in-Aid by Peter Mieszkowski;William H. Oakland; Understanding Intergovernmental Relations by ...Review by: Norman BeckmanPublic Administration Review, Vol. 41, No. 6 (Nov. - Dec., 1981), pp. 693-701Published by: Wiley on behalf of the American Society for Public AdministrationStable URL: http://www.jstor.org/stable/975749 .

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693

BOOK REVIEWS MICHAEL J. WHITE

Review Editor's Choice

R. J. Bennett, The Geography of Public Finance: Welfare Under Fiscal Federalism and Local Government Finance. New York and London: Methuen, 1980. x + 498 pp.

This textbook addresses almost the entire area of governmental finance from the intergovernmental perspective. Bennett, in a unique and sensible approach, emphasizes intergovernmental relationships and other spatial relationships rather than detailed theoretical explanations of such matters as tax incidence. Among the fortunate consequences of his chosen emphasis is that public choice theory fits very well here. This text has a good short discussion of public goods; chapters on revenue incidence, benefit inci-

dence, and capital financing; and an entire section, com- prising the last half of the book, specifically on intergovernmental fiscal relations. Bennett uses empirical studies extensively to make his points. In addition to abun- dant examples from American and British public finance, he also refers frequently to Canadian, Australian, and con- tinental experiences. Algebraic formulations are rare, but graphs and charts are used to great advantage. This text can certainly be used by public administration Master's students, and should also prove useful for upper division undergraduate courses as well.

(J.I.C.)

INTERGOVERNMENTAL RELATIONS: THE FUTURE IS NOW

Norman Beckman, The George Washington University

Toward a Functioning Federalism, David B. Walker, Cam- bridge, Mass.: Winthrop Publishers, Inc., 1981, pp. 267 (paper).

Explaining America: The Federalist, Garry Wills, Garden City, N.Y.: Doubleday and Company, Inc., 1981, pp. 286.

The Politics of Federal Grants, George E. Hale and Marian Lief Palley, Washington, D.C.: Congressional Quarter- ly Press, 1981, pp. 178.

Managing Federalism: Evolution and Development of the Grant-in-Aid System, Raymond A. Shapek, Charlottes- ville, Va.: Community Collaborators, 1981, pp. 306.

COUPE Papers on Public Economics-Fiscal Federalism and Grants-in-Aid, Peter Mieszkowski and William H. Oakland, eds., Washington, D.C.: The Urban Institute, 1979, pp. 166.

Understanding Intergovernmental Relations, Deil S. Wright, North Scituate, Mass.: Duxbury Press, 1981.

The New Federalism, Second Edition, Michael D. Reagan and John G. Sanzone, Oxford, New York: Oxford Uni- versity Press, Inc., 1981, pp. 196 (paper).

NOVEMBER/DECEMBER 1981

The Federal Role in the Federal System: The Dynamics of Growth, An Agenda for American Federalism: Restor- ing Confidence and Competence, Advisory Commission on Intergovernmental Relations, Washington, D.C., June 1981, A-86, pp. 188 (paper).

In 1955 the Commission on Intergovernmental Relations chaired by Meyer Kestnbaum issued a definitive reappraisal of our federal system.' It was characterized at the time as a million dollar textbook. In 1981 President Reagan ap-

Norman Beckman is currently professor of public administration and associate director of the Office of Research and Continuing Professional Education of the George Washington University. He has worked on intergovernmental assignments at the Office of Per- sonnel Management, the Congressional Research Service, the Ad- visory Commission on Intergovernmental Relations, the Depart- ment of Housing and Urban Development and the U.S. Bureau of the Budget.



694 PUBLIC ADMINISTRATION REVIEW

pointed a blue ribbon group with similar representation (executive branch, Congress, state and local government, private) to likewise study and advise on the subject. The volumes reviewed basically examine what has happened in those intervening 26 years.

This essay will seek to describe and critique each of these recently published volumes in the light of a number of basic intergovernmental issues that are currently being debated. The analysis will include a comparison of the authors' conclusions with recommendations and actions taken through July 1981 by the new administration.

Most of the themes examined are fundamental:

* What is the federal responsibility for redistributing income among governments?

* Is there a proper division of labor between all levels? * How far should we cut back the role of government

generally, and the federal role in particular? * What should be the federal strategy regarding the

relationship of the states to their cities? * What is the proper mix of general revenue sharing,

block grants, categorical grants, project grants, cooperative agreements, and contracts?

* Has there been an excess of zeal in using the regulatory process to achieve national goals and social objectives?

* Is the present system viable? Reformable? Or is a turnback of both functions and resources necessary?

The books are a potpourri of texts, public documents, history lessons and essays. Walker provides an historical and comprehensive explanation of the reforms of the day. Wills gives us a philosophic-historical interpretation of the Federalist Papers and their current relevance. Hale and Palley provide a description of the politics of federal grants. Shapek documents the massive management efforts made since the late sixties to make the current grant-in-aid system work better, short of major consolidation or re- structuring. The Urban Institute brings together the con- tributions of a number of economists to the subject of intergovernmental fiscal relations. Two existing texts in the field, those of Wright and Reagan, have been updated. Finally, the overall report of a three-year, 11-volume effort by the Advisory Commission on Intergovernmental Rela- tions offers its agenda for restoring confidence in the federal role in the federal system.

These authors, the present administration, and recent presidents would have no trouble accepting the philosophy spelled out by the Kestnbaum Commission:2

Leave to private initiative all the functions that citizens can perform privately; use the level of government closest to the community for all public functions it can handle; utilize cooperative intergovernmental arrangements where appropriate to attain eco- nomical performance and popular approval; reserve National action for residual participation where State and local governments are not fully adequate, and for the continuing responsibilities that only the National Government can undertake.

Their opinions differ, however, on interpreting the last four lines. There is a concerted effort today to roll back what has been widely interpreted as an aggressive move-

ment by the federal government into activities better reserved to state and local governments or private individuals. In academe and in Washington, the question is: When ought the federal government act? An even better formula- tion is: How do we best utilize our federal system to resolve our problems while maintaining the health of the system? The proper role of the federal government is the pragmatic issue around which all of these books revolve.

How Did We Get Here in the First Place?

Connoisseurs in the field have long awaited the publication of David Walker's comprehensive interpretation of intergovernmental relations and it can now be found in Toward a Functioning Federalism. He has been in a unique position, as assistant director of the Advisory Commission on Intergovernmental Relations during the last 15 years, to conduct major research in the field, review the work of others and appraise and be involved in the panoply of developments firsthand. He has also been perhaps the most articulate Cassandra regarding system overload, and was given the Practitioner Award for Intergovernmental Man- agement in 1980 by the American Society for Public Ad- ministration's Section on Intergovernment Administration and Management.

The book opens with a standard critique of recent developments, using Muncie, Indiana, of Middletown fame, as a case study. Twelve dimensions of the current intergovernmental system are described, though the story boils down to two: more dollars and more programs. The terms used are mostly pejorative: deluge of dollars, proliferation of programs, panoramic partnership, shift in power among the "partners" in favor of local governments, creeping condi- tionalism (he does turn a phrase), elusive fiscal effects, and grant conditions creating new quasi-governments. The situation described is bad enough to have influenced the last election. Still, it would be nice to see more space devoted to some of the benefits of the process.

Half the book is devoted to American intergovernmental history. This is a labor of love, smacking of class lecture notes with considerable fine tuning by the author. It satis- fies where Will's work on federalism (with its scant treatment of federal-state-local relations-see below) makes one hungry for more. It provides a proper historical perspective for the more dramatic recent developments and reform proposals. During three eras of American history (1790-1860, 1860-1930, and 1930-1960) the system operated with mini- mum intergovernmental interaction or sharing of responsibilities. The period since 1960 is covered in even greater detail. Walker documents the replacement of dual or layer- cake federalism by a collaborative, or in Walker's term "overloaded cooptive system."

Most readable and useful is the chapter interpreting the impact of each of the contemporary presidents, beginning with Lyndon Johnson. "At the heart of the Johnson approach was a near monolithic reliance on the conditional grant device to achieve his Great Society goals . . . " (p. 103) Nixon, given the (now old fashioned) resistance of




BOOK REVIEWS 695

Congress to administration-proposed cut-backs, supported "'greater decentralization within the federal departments to their field units; and a streamlining of the service delivery system generally. During the 60's and 70's, Congress' approach to federalism is described as being "incremental, confrontational, strongly categorical (as well as anti-block grant and anti-general revenue sharing), heavily conditional, and politically cooptive." (p. 108). Carter's approach had as its themes "managerialism, greater access and improved intergovernmental procedures, fiscal prudence, and program initiatives especially to urban jurisdictions and genuinely needy people." (p. 114) In a sense Toward a Functioning Federalism and the other books reviewed are already out of date as Reagan makes great progress in reducing the federal role generally, aborting new regulations and terminating old ones, and vigorously moving toward block grants as one tactic in this strategy of reducing fiscal aids and returning tax sources to state and local governments. But, what's a textbook for, if not to be updated.

The final section of the book is an attempt to document the author's frequently repeated thesis that in 1980 there now prevails a "dysfunctional, if not futilitarian, form of federalism . . ." The chapter on the federal judiciary is especially useful. The major evolving judicial doctrines involve expanding national authority via the commerce power, the equal protection and due processes clauses, and the massive but little recognized body of case law involving federal grant-in-aid administration. The judicial debate continues. In June of this year, subsequent to Walker's analysis, the Supreme Court ruled unanimously that federal strip-mining regulations do not interfere with states' traditional function of regulating land use. In the same month the court moved in the opposite direction by setting limitations on the power of federal judges to order sweeping reforms in state prisons.

The chapter on fiscal federalism is a kind of residuum of the work in this field done by ACIR and others over the years. State revenue systems are, with the exception of some in the Northeast and Midwest, in good shape. The heady illusion of a federal cornucopia has disappeared, replaced by social security deficits, defense spending, and a belief that federal deficits fuel inflation. The local government revenue trends are more difficult to discern. Increas- ingly, they are dependent on intergovernmental fiscal trans- fers. The argument that the public sector is starved is now both archaic and politically unacceptable. Walker, the public generally, the Reagan administration, and now, ap- parently, the Congress have reacted against a process of cooperative federalism that in 20 years evolved into a "cooptive, as well as dysfunctional federalism, whose problems and paradoxes" (p. 189) made it a first order of business for the new president.

The book reaches a climax (if such a term can be used about a book on intergovernmental relations) deploring "An Overloaded Servicing System." Some "scare" statis- tics are cited. Federal mandates directly ordering state and local action rose from 10 in 1960 to 224 in 1978; those imposed as grant conditions from four in 1960 to over a thou-


sand in 1978. Regulations in the Federal Register grew from 14,000 in 1960 to 71,000 in'1979. (Yes, but how many dealt with intergovernmental relations rather than the private sector?) Walker states that during that period federal pre- emption was total in such fields as flammable fabrics, grain standards, and radiation control for health and safety. (Is this wrong? Would we want it any other way?) Of some 492 categorical grants funded in 1978 only the states were eligible for 38 percent of them, localities for 6 percent and the states, localities and nonprofits were eligible for 43 percent. Thus, the grant system is thoroughly scrambled, both in numbers and in eligibility.

This takes us to the subject dealt with last, the politics of intergovernmental relations. Many of the deficits for which the present system is criticized are attributed to the weakness of the political party system. Again, the administration has written its own new chapter on the subject. The president has taken the virtually unprecedented action of moving to carry out campaign promises. The popularity of the action has done much to bring about party discipline in the Senate and a realized conservative Democratic and Repub- lican majority to the House.

Walker predicts that the criticism of the current system should result in constructive debate leading to some grant consolidations, eliminating weak programs and slowing down new regulations. These things are being done. Now, the debate will be on how well it is being done. The next question is what actions to take which "go beyond the basics of budgets to rebuilding the system itself? This is the key question these antidysfunctional federalists pose" (p. 246).

Walker's recommendations lack the operational speci- ficity of a typical ACIR report. There is one specific pro- posal offered, federal assumption of such national concerns as welfare and unemployment compensation, a recommendation proposed by ACIR but rejected by the president and Congress. The difference of opinion is a crucial one. Is the proper road to reform simply for the federal government to do less or is there to be a true division of labor among the levels of government?

Garry Wills' Explaining America: The Federalist lies on the fringes of this review of new works on federal-state- local relations. The book is an historical-philosophical interpretation of the 85 Federalist Papers written (predominantly) by James Madison and Alexander Hamilton and published in the local newspapers of the time in support of the adoption of the Constitution by the states of the confederation. Wills is an especially appropriate commentator, being both a syndicated newspaper columnist as well as a professor and history writer.

Federal-state relations are a significant but small part of the overall issue facing the writers and ratifiers of the Con- stitution and, indeed, Mr. Wills devotes only two of 31 chapters explicitly to the intergovernmental topic. The quintessence of our system of government is found in Madison's Federalist Paper Number 10 as follows:

Extend the sphere, and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common motive to invade the rights of other citizens;




or if such a common motive exists, it will be more difficult for all who feel it to discover their own strength, and to act in unison with each other.

From this concept flows our electoral system of "single member" districts, a Congress composed of people elected by state and local governments, and a theory of "public interest representation." Madison would also probably be pleased by the weakness of our national political parties which prevents a majority from riding roughshod over certain states or interests.

Wills reminds us that the problem facing Madison, Hamilton, Washington, and others was to get agreement among the states to form a viable national government; hence, the emphasis on the protection from the arbitrary use of power by the national government. "In the com- pound republic of America, the power surrendered by the people, is first divided between two distinct governments, and then the portion allotted to each, subdivided among distinct and separate departments. Hence a double security arises to the rights of the people. The different governments will control each other; at the same time that each will be controlled by itself" (Federalist, No. 51).

Madison and others recognized the need for national supremacy and that the basic weakness of the Articles of Confederation was the true sovereignty of the states. Dur- ing the constitutional convention, Madison proposed a federal veto over state laws. Wills argues that Madison and Hamilton used "sweet talk" in the Federalist papers to allay state fears. Madison noted that in raising their own taxes, states had an assurance of equal authority with the national government. The authors of the Federalist Papers were not enthusiastic about a clash between the two sover- eign systems. For them, pitting sovereignty against sovereignty was a formula for disaster. Historical experience also affirmed Madison's prediction that showdowns are rare and that compromise and give and take would resolve most issues.

Wills gives us a history lesson. A review of the roots and politics of the Federalist papers can help provide insight in- to our current system of divided powers. The biographical information on the education of Madison, Hamilton, and others reminds us of the role of the university in developing the nation's leadership. Without such founding fathers- their ideals, their labors in search for the public interest- there would have been no United States today subject to modification and improvement. Perhaps what Wills is tell- ing us is that even the best federal system in the world needs a few good people to run it.

Money Makes the System Go Round

The Politics of Federal Grants by Hale and Palley provides a useful backdrop to the current debate on restruc- turing the federal grant-in-aid system. It provides a relatively elementary but comprehensive treatment of the subject. Acknowledging that intergovernmental relations in our political system cover a range of involvements, the book is limited to one relatively measurable element, namely federal grants to state and local governments and special

districts. It purports to look at the policy process as it af- fects the politics of grants-in-aid and the impact of those dollars on subnational governments. Chapters are devoted to identifying the actors in the process, the role of Con- gress, federal implementation, the impact on state and local governments generally, and urban areas and small towns in particular.

The Politics of Federal Grants is basically descriptive but one innovative analytical contribution is made. The authors suggest that the intergovernmental grant system is similar to that of government regulation of business. They find that groups outside of the federal decision-making process make demands. The regulating (making grants) agencies and the regulated (grant receiving) organizations become interde- pendent. In the process federal influence is limited.

"Many private firms have become dependent on regulatory agencies to protect them from competition, and the Federal grants process works in the same way: in effect, to insulate public programs from having to compete for local or state funding. Thus, in both the public and private arenas we find officials trying to have their cake and eat it too; that is, publicly criticizing Federal intrusion while simultaneously resisting proposals to deregulate activities or terminate Federal funding." (p. 167)

A benefit of the regulatory model is that it links intergovernmental relations with the broader body of knowl- edge of interest groups and regulatory politics. Instead of employing high-priced, Washington-based law firms, the organizations representing state and local elected officials (and individual governments) maintain lobbying organizations in Washington.

In addition to the big seven public interest groups, a number of newer organizations concerned with grants policy have been formed in recent years, including the Na- tional Association of Towns and Townships, the National Association of Smaller Communities, American Associa- tion of Smaller Cities, National Association of Regional Councils, and the National Conference of Black Mayors. Sun Belt, Frost Belt polarizations have helped create the Coalition of Northeast Governors, Southern Growth Policies Board, and Western Governors Conference.

The authors make a point not frequently acknowledged by critics of the current system; namely, that grant programs involve reciprocal influence rather than complete domination by the federal government. Granting agencies focus on broad national program goals. In a variation on Madison's thesis in Number 10 of the Federalist papers, the authors conclude as follows:

"The interplay of grant demands may make compliance difficult for receiving jurisdictions, and the aid recipients often interpret Federal rules and regulations differently. Also, because of the fungibility involved with many grants, some jurisdictions can maintain federally funded programs while evading regulatory control. The larger the jurisdiction, and the greater the number of grants, the more influence the grantee may have." (p. 168)

Shades of Federalist No. 10. One of the more useful chapters is that on implementa-

tion. Except on the question of allocation formulas, the ad- ministrative details of new grants laws tend to be vague, permitting the federal administrators to make key deci-




BOOK REVIEWS 697

sions. Some useful examples are given of the cost of regulation. The Department of Transportation's rules on access for the handicapped and the Environmental Protection Agency's rules to protect municipal drinking water imply several billion dollars in costs to local governments.

The politics of grants-in-aid, especially project grants where awards are discretionary rather than a right of state and local governments, is captured succinctly. They write:

In July 1978, HUD Secretary Patricia Harris announced the creation of 89 urban development action grants. Approximately 73 percent of the $262 million in awards went to cities represented by members of the House or Senate committees overseeing HUD activities. Asked about this relationship, Secretary Harris denied favoritism. "I'm asking you to believe," said Harris, "that those cities have great need and that they have recognized this need by electing outstanding leaders of the House and Senate." (p. 79

Tensions are cited among general purpose governments over the formulas and channeling of grants. The trend of the last decade to fund local governments directly has posed cities vs. counties vs. special districts as competitors in their roles of delivering urban services. Splits are also created between large cities and small cities explicitly in such programs as CETA, the community development block grant programs and the community development aids of the Department of Agriculture. The authors did not fully an- ticipate the tensions being created by the block grant consolidation proposals which would channel certain urban monies and decision making through the states, disrupting current patterns of federal-local accommodation.

Some minor criticisms of the book can be raised. A more rigorous editing effort might have improved the occasional- ly simplistic style of the volume. Thus, "both the president and Congress can play important roles in originating policy." "In this chapter we will show that policy adoption is a complex process," and so forth. There is occasional use of a clouded crystal ball. For example, the chapter on policy adoption concludes that the grant system will probably continue "in the same incremental and haphazard manner as it has in the past."

The "conclusions" and "prospects" for the future" chapters of this and most of the other volumes are almost always tiny and unventuresome. The six-page effort here is mainly a wrap-up. The authors do note "that rising defense spending and entitlement payments to individuals-such as Social Security Insurance-will continue to squeeze the grants sector." The authors perhaps erroneously conclude that this will lead to stiffer competition among jurisdictions. Actually, the Reagan block grant approach will generally provide statutory formula entitlements to all eligible recipients, thus significantly reducing competition. Finally, they wisely observe that such block grants may prove to be easier targets for future budget cuts since they don't involve focused support among special interest organizations and subcommittees.

The primary contribution of Managing Federalism: Evolution and Development of the Grant-in-Aid System by Raymond A. Shapek is to document the federal efforts over the years to make the intergovernmental grant-in-aid system more rational. While the book promises to describe


"the workings of the entire Federal assistance system," what is described in depth are project, categorical, block, and general revenue sharing grants. A useful foreword by Wayne Anderson of the Advisory Commission on Inter- governmental Relations lists a five-point strategy for improving the federal grant system: standardize and simplify procedures, consolidate existing categorical grant programs, assess more carefully the impact of grant regulations and requirements, evaluate effectiveness of individual programs and reexamine the division of labor among the federal, state, and local levels. Shapek's book addresses all five areas, but concentrates on efforts to simplify and standardize administration of the system.

The material on the historical evolution of the system, general revenue sharing, and grant consolidation is available in more definitive studies. What is useful is the collect- ing, describing, and putting into context the range of man- agemnent initiatives coming out of the Office of Manage- ment and Budget, the White House, and the Congress. A chapter covers the federal responsibility for assisting in the upgrading of state and local management capacity. This is not a book that will tell you about the problems or accomplishments of any one grant program. It does document the valiant efforts made to change the system. The Reagan budget cutting strategy is still another approach.

The book gives us an opportunity to learn more about such exotica as the three-year federal assistance review (FAR) effort to decentralize, delegate, and make more uniform grant administration through common federal regional boundaries, Federal Regional Councils and reduced processing time. The book is also a place to learn about the integrated grant administration program, the Joint Funding Simplification Act, and the regional management information system. Detailed summaries are provided of OMB budget circulars covering grant audits, cost principles, uniform requirements, and so forth. Nine pages are devoted to the Budget Circular A-95 review process, one of the few explicit federal efforts to strengthen metropolitan governance, decision making, comprehensive regional planning and information sharing.

After covering Nixon administration activities in perhaps disproportionate detail, Shapek proceeds to give us a well- documented, nuts-and-bolts enumeration of Carter efforts to reform the administration of the federal grant-in-aid system. At the time he wrote, the highlight of this era ap- peared to be the enactment of the Federal Grant and Coop- erative Agreement Act of 1977 (P.L. 95-224). The legislation for the first time made a careful distinction between federal grants, (no federal involvement) contracts (use of procurement procedures), and cooperative agreements (substantial involvement by federal agency and recipient).

The act also mandated a major study of federal assistance, producing (subsequent to publication of the Shapek volume) an 11-volume, 2,000-page report3 and OMB recommendations for a lead agency approach on the 59 crosscutting requirements itemized in the study.4

All of these management concerns and initiatives have been talked about since the Johnson administration, but Shapek wisely observes that while these reform efforts were reported at face value in White House press releases,




reports of accomplishments were often misleading. In 1977-78 federal agencies "stretched" the facts in order to assure the president that they were complying. A related aspect of the ineffective reform effort is illustrated by the initiative to produce a national urban policy. As one critical commentator noted, however, not one of the 160 recommendations made in the cabinet-level committee report recommended eliminating a single existing federal program.

The major management improvement effort undertaken by the Carter administration was the president's reorgani- zation project involving several hundred staff and 27 major studies. A second thrust was to develop a zero-based budget system for each agency. The present administration appears to be much more aware that, in public administration as in architecture, form follows function. A well staffed out initiative is currently being carried out to consolidate and eliminate grant programs, to abort new federal regulations, ,and to scale back existing requirements. Pro- gram elimination is inevitably more decisive than reassign- ments and analysis of budgetary increments.

The Shapek volume is also an excellent reference course and repository of footnote citations and chapter bibliogra- phies. The book is marred, however, by a large number of typographical errors. Even a random review has Harold Seidman spelled Sidman, Conley Dillon spelled Dillion, Bernard Frieden spelled Frieder, Selma Mushkin spelled Muskin, and so forth. Typical of the other volumes reviewed, the prognosis for federalism is given a short four pages.

Although public administrators give lip service to the other social sciences, both practitioners and university public administration departments tend to stick to their own disciplines. Fiscal Federalism and Grants-in-Aid, edited by Peter Mieszkowski and William H. Oakland, is the first of a series of volumes on public economics published by the Committee on Urban Economics and the Ur- ban Institute. Moving beyond the ACIR-type economic analysis to study the relationship of grants-in-aid to both the public and private sectors, the 12 papers and discussant comments focus on the theory and measurement of the effects of federal grants to state and local governments.

One of the main themes is the phenomenon of the "fly- paper effect" (money sticks where it hits). The form in which grant assistance is given is very important in pre- dicting the effect of the grant on local public spending. The generally confirmed result is that matching grants stimulate more spending per dollar of grant than do nonmatching, revenue-sharing types of grants. At the same time, research now indicates that nonmatching grants stimulate much more local spending per dollar of grant than does income going to private citizens within the community. Bureaucrats and politicians find it easier to avoid cutting taxes when the government receives revenue-sharing monies.

Marvin Johnson in his paper on local school districts finds that local officials like to spend but they don't like to raise taxes. Howard Chernick reports that the federal grant administrators will take demand into account in allocating (to the extent they have discretion) federal grant appro- priations. Governments willing to spend more are likely to get more grants. Roger Vaughan examines the utility of us-

ing federal grants for countercyclical purposes. A major finding, confirming the new administration's effort to sub- stantially reduce Economic Development Administration programs and related countercyclical grants is that over 90 percent of the second round jobs for public works are created outside of the depressed area's labor market. Rudolph Penner in an appraisal of categorical grants found a movement toward per capita equality in the allocation of grants by state. At the same time, the categorical grant system does not have a great redistributive effect; both the five wealthiest and the five poorest states had higher payments than the national average. Categorical grants are criticized for being too small to be effective and for not being income weighted in favor of low income persons. He notes that consolidation gives state and local officials more discretion but that liberals are suspicious of consolidation despite the efficiencies involved.

As the Reagan administration moves past its first round of reductions and consolidations, these kinds of analyses provide the basis for a more considered systematic set of grant reforms. With major consolidations and terminations now being approved, it may be hoped that research com- parable to the work done on community development block grants and on general revenue sharing will be undertaken.5

High Texts

Two earlier superior texts on intergovernmental relations have recently been updated and are therefore worthy of at- tention. Deil Wright's Understanding Intergovernmental Relations, especially as revised, will continue to be a leading text on the subject. It is a comprehensive and balanced treatment of the subject. While Wright's research interests have been primarily at the state and local level, a special strength of the book is the melding in of significant federal impacts on intergovernmental relations as well. Few authors are as comfortable with developments, trends, and so forth, at all three levels and their interrelationships. The approach taken in organizing the book is to relate three themes: (a) changes in the system, (b) concepts that furnish a framework for relating intergovernmental developments, and finally (c) a description of the operational aspects, including both historical/institutional and quantitative/empirical approaches. The book does not advocate or offer a particular policy/political point of view. Its textbook-like objective is to describe how governments operate in theory and especially in fact. The book is filled with important trend data, illustrations, and creative use of charts and dia- grams. The graphics, paper, and typography are superior to the other paperbacks and the Shapek volume reviewed here.

The second edition update is a virtual chronicle of operational and scholarly developments since 1977. Most of the significant new research, government policies, and public documents are here. New chapters cover such topics as sec- tionalism; regionalism; energy; regulatory and fiscal relations; role of the states, especially interstate and state-local relations and prominence of administrators as intergovern-




BOOK REVIEWS 699

mental actors. To the first edition chapter on historical phases of intergovernmental relations has been added a new era, "calculative intergovernmental relations" which began in the 1970s, replacing the earlier competitive period. Some newly emphasized intergovernmental topics are discussed such as local government bankruptcy, dependency, constraints, loss of public confidence, grantsmanship, fungibility, overload, bypassing of state governments, and the intrusion and awareness of crosscutting requirements. One interesting finding: if the federal grant did not exceed $40,000, the cost of pursuing and reporting on the grant ex- ceeded its benefits.

An interesting framework of strategies followed by federal grant agencies in dealing with state and local aid recipients is described. The four federal agency strategies are (a) creation of counterpart organizational structure; (b) colonization of the agency with like professionals; (c) agenda setting that co-opts the activities of the receiving agency; and (d) bargaining to compromise differences while providing mutual support.

Wright also observes that the decline in political party cohesion has resulted in state/local elected officials taking political initiative through the National Governors' Association, the U.S. Conference of Mayors, the National Association of Counties, and other organizations. The current administration has a clear strategy of supporting the states. Wright notes that one of the consequences to governors of increased managerial, political, policy leadership, and intergovernmental "lynch pin" responsibilities is to place greater pressure on the governors. Having made the presidency virtually unmanageable by assigning it too many roles, are we able to do the same thing to our governors?

Michael Reagan, and John Sanzone, who joined in up- dating Reagan's The New Federalism, declare that the old separation of powers federalism is dead. Alive and well is permissive federalism which means a sharing of power and authority between the national and state governments, with the state's share resting on permissiveness of the national government. To Reagan and Sanzone the name of the game is fiscal federalism.

The problem, according to Reagan and Sanzone, is "fiscal mismatch." It is easier and more equitable for the national government to raise money than for state and local governments to do so. This basic aspect of our intergovernmental fiscal system is worth repeating as we reach toward reduced federal spending and taxation. After stating the arguments for general revenue sharing, the authors somewhat perversely conclude that it has not lived up to stated goals. Despite the impressive state and local support for revenue sharing, they opt for federal spending targeted to national problems such as unemployment and welfare. Betraying certain limitations as short-term fore- casters, they speculate that the federal financial role in the intergovernmental system will increase further; the national government will assume services previously handled on a shared basis; the predominant mode of federal financial assistance will continue to be that of categorical grants; and the "acceptance of the proposition that it is proper for the goals and standards of public services to be set by the national government as a basis for uniform rights of


citizens." (p. 167) These are recommendations for yester- day or tomorrow, but not today.

Alternatives to Tinkering with the Federal Role

Congress, in renewing legislation for general revenue sharing (P.L. 94-88), requested the Advisory Commission on Intergovernmental Relations to "study and evaluate the American federal fiscal system in terms of the allocation and coordination of public resources among federal, state, and local governments." Under this formal mandate, the Commission is producing an 11-volume series on The Federal Role in the Federal System: The Dynamics of Growth, being issued throughout 1980 and 19816

Four of the volumes are collections of data, hearings, symposiums, etc., and seven are case studies portraying the growth in federal aid for both large and relatively small grant programs. It is the predominant body of scholarly work in the field and should provide the grist for the next round of academic writing on the subject.

The conclusions drawn by the commission are cast in un- remittingly negative terms. The major institution concerned with the health of our federal system finds the system in trouble: federal influence has become more pervasive, in- trusive, unmanageable, ineffective, costly, and more un- accountable. The commission admits that it has concentrated on the federal aid system's problems and that the accomplishments of the system are neither denied nor mini- mized (nor are they articulated). Individual programs are studied but recommendations are concentrated on the cumulative effects on an "overloaded" system. The linkage between the case study findings and the general recommendations is sometimes less than persuasive. It's an un- usual phenomenon in which the sum of the system is less than its individual parts.

The three-year, 11-volume ACIR study is pulled together, with recommendations, in An Agenda for Ameri- can Federalism: Restoring Confidence and Competence (A-86).' This centerpiece report is likely to serve as a government-sponsored text in the field for several years to come. The federal role was found to have become bigger, deeper, and broader but not better. Who caused the system to grow so? A useful chapter appraises the role of each of the policy actors-Congress, interest groups, the president, the bureaucracy, the courts, public opinion, political parties, and the press. The main villain(?) was found to be the individual member of Congress, acting either alone or with others. It may be appropriate to end this essay with a review of the commission's recommendations and relate them, where applicable, to the actions of the Reagan administration during its first six months in office.

A Convocation on Federalism. The commission recommends that the president, at the earliest possible date, con- vene a Convocation on Federalism. In April the administration appointed two high-level bodies dedicated to a fundamental reordering of the American system of federalism, an in-house Coordinating Task Force on Federalism and a mixed membership Presidential Advisory Committee on Federalism. Bills are also pending in both houses of Con-




gress to establish special commissions for the study of federalism in the 1980s.

Meeting National Responsibilities. The commission urges full federal financial assumption of fundamental social welfare functions including Aid to Families with Dependent Children, Medicaid, and general assistance. The administration has shown no inclination to further fed- eralize these major welfare programs. The strategy appears to be one of decentralization rather than division of labor among the levels.

Decongesting the Grant System. The commission pro- poses that the number of categorical intergovernmental aid programs, now nearly 500, be drastically reduced through consolidation, termination, or devolution. Candidates for termination include the 420 small programs, which together comprise only 10 percent of federal aid. President Reagan's A Program for Economic Recovery,8 plus related budget and legislative documents, propose approximately 15 new block grants, consolidating in the neighborhood of 130 existing programs. In addition, the president's Program would eliminate 95 other existing grant programs.9

If all these proposals are eventually enacted, more than 200 grant programs would disappear. This would constitute very substantial progress toward ACIR's recommended goal of reducing the total number of grants by at least half. Former President Carter in his first formal reaction to the Reagan budget complained that "an enormous transfer of government benefits is now taking place from the very poor to the very rich. . . ." He warned of "an inevitable increase

in state and local taxes," most likely in the form of "highly regressive property taxes and sales taxes," to replace lost federal revenues.'? Thus, strategic grounds have been occu- pied by both sides for the next round of intergovernmental policy debate.

Rolling Back Regulation. Over 1,200 regulations and mandates are now imposed on states and localities. The commission urges that these costs be estimated, through fiscal notes and regulatory impact analyses, for every proposed federal law and regulation. The administration has established a Task Force on Regulatory Relief chaired by Vice President George Bush, postponed the effective dates of pending regulations, and issued Executive Order 12291 on February 17, 1981, giving Office of Management and Budget oversight of the regulatory process. As of July, 1981, the administration has made 34 major regulatory moves to relieve state and local governments-including giving states more responsibilities for regulating strip- mining and scrapping proposed General Revenue Sharing regulations requiring access for handicapped persons on GRS funded projects. Finally, the Regulatory Reform Act of 1981, S. 1080, (and H.R. 3339) introduced in the Senate by Senator Laxalt with 75 co-sponsors would require federal agencies to perform cost-benefit analysis on all proposed major rules.

Improving Grants Administration. The commission urges swift passage in the 97th Congress of S.807 and H.R. 3680, the "Federal Assistance Improvement Act" to (1) en- courage consolidation of related grant programs through submission of presidential consolidation plans to Congress, (2) simplify federal requirements broadly imposed as a con-

dition of most grants (the "crosscutting" regulations), (3) streamline federal audit procedures, (4) strengthen the joint funding process, and (5) provide grant recipients with regulatory flexibility. Like the previous administration, this administration has supported the enactment of this legislation.

General Revenue Sharing. The commission believes that

General Revenue Sharing should be the last federal aid program to be sent to the austerity chopping block. The commission reaffirms its support for continued inclusion of the states' share. In extending GRS, Congress authorized a state share for 1982 and 1983, but required that states give up an equal amount of categorical funds for any GRS funds appropriated for them.

Indexing Federal Taxes. The commission recommends that federal income taxes, now rated as the "least popular" type of tax in the ACIR annual poll on public attitudes toward government and taxes (replacing the property tax), be indexed against inflation. Though there is considerable congressional interest, the administration has not endorsed indexation but has proposed a 30 percent roll-back over three years.

In summary, most of the books reviewed are quite negative in tone and contain both broad brush and detailed criticism of the federal role in the federal system. The authors are mostly rejecting a formidable intergovernmental process developed over the last 20 years to redistribute income, achieve social objectives and meet national goals. The critics are predominantly from the liberal establish- ment. Even public administration practitioners and publicly financed institutions join in the criticism of the process that feeds them. They find themselves joined by the neo- conservatives who reach the same conclusions about the present system by a different route. The latter enjoy a political climate and position that permits them to start to wind down the system. As of today, the case for a positive set of reforms has still to be written.

Notes

1. Commission on Intergovernmental Relations, The Final Report of the Commission on Intergovernmental Relations, House Document No. 198, 84th Congress, 1st Session, Wash- ington, D.C., U.S. Government Printing Office, 1955.

2. Ibid., p. 6. 3. Managing Federal Assistance in the 1980's: A Study of Fed-

eral Assistance Management Pursuant to the Federal Grant and Cooperative Agreement Act of 1977 (Pub. L. 95-224), U.S. Executive Office of the President. Office of Manage- ment and Budget. Intergovernmental Affairs Division. August 27, 1979. 11 volumes, 1920 pages.

4. Managing Federal Assistance in the 1980's: A Report to the Congress of the United States Pursuant to the Federal Grant and Cooperative Agreement Act of 1977 (Pub. L. 95-224), U.S. Executive Office of the President. Office of Manage- ment and Budget. March 1980. See also the recent work on federally imposed requirements in Catherine Lovell and Charles Tobin, "The Mandate Issue," Public Administra- tion Review, May/June 1981, pp. 318-330.

5. See for example Richard P. Nathan, et al., Revenue Sharing: The Second Round (Washington, D.C.: The Brookings In-




BOOK REVIEWS 701

stitution, 1977) and, Block Grants for Community Develop- ment. U.S. Department of Housing and Urban Development (Washington, D.C.: U.S. Government Printing Office, Jan- uary, 1977).

6. A Crisis of Confidence and Competence (A-77), July 1980; Federal Involvement in Libraries (A-84), June 1980; Public Assistance: The Growth of a Federal Function (A-79, July 1980; The Federal Role in Local Fire Protection (A-85), November 1980; Reducing Unemployment: Intergovernmen- tal Dimensions of a National Problem (A-80); Intergovern- mentalizing the Classroom: Federal Involvement in Elemen- tary and Secondary Education (A-81); The Evolution of a Problematic Partnership: The Feds and Higher Ed (A-82); Protecting the Environment: Politics, Pollution, and Federal Policy (A-83), Winter 1981; The Condition of Contemporary Federalism: Conflicting Theories and Collapsing Constraints (A-78); The Federal Role in the Federal System: The Dynam- ics of Growth, An Agenda for American Federalism: Restor- ing Confidence and Competence (A-86), June 1981; Hearings on the Federal Role (A-87), December 1980.

7. See also, Advisory Commission on Intergovernmental Rela- tions, In Brief, The Federal Role in the Federal System: The Dynamics of Growth (Washington, D.C.: U.S. Government Printing Office, December 1980), B-4, p. 1. This is a useful summary pulling together the findings and recommendations of the entire Dynamics of Growth series.

8. U.S. House Document No. 97-21, Program for Economic Recovery-Message From the President of the United States Transmitting a Plan to Achieve Recovery for the Nation's Economy, 97th Congress, 1st Session (Washington, D.C.: U.S. Government Printing Office, February 1981).

9. Thomas R. Ascik and Jonathan Hobbs, "The Reagan Block Grant Proposals and Congressional Revision." Heritage Foundation, Washington, D.C., Backgrounder No. 145, June 17, 1981, p. 16. See also Ascik, "Block Grants and Federalism: Decentralizing Decisions," Backgrounder No. 144, June 5, 1981, 34 pp.

10. The Washington Post, July 9, 1981, pp. Al, A4.

STATE LEGISLATURES AND THE NEW FEDERALISM

Leonard P. Stavisky

Legislative Life: People, Process and Performance in the States, Alan Rosenthal, New York, N.Y.: Harper & Row, 1981, pp. 354, $10.95, paperback.

Representative Democracy: Public Policy and Midwestern Legislatures in the Late Nineteenth Century, Ballard C. Campbell, Cambridge, Mass.: Harvard University Press, 1980, pp. 260, $20.00, cloth.

A Policy Approach to Political Representation: Lessons from the Four Corners States, Helen M. Ingram, Nancy K. Laney and John R. McClain, Baltimore, Md.: John Hopkins University Press, 1980, pp. 270, $22.00, cloth.

The Impact of Reapportionment, Timothy G. O'Rourke, New Brunswick, N.J.: Transaction Books, 1980, pp. 213, $14.95, cloth.

Politics Backstage: Inside the California Legislature, Michael J. BeVier, Philadelphia, Pa.: Temple University Press, 1979, pp. 277, $18.95, cloth.

Reapportionment: Law and Technology, Andrea J. Woollock (ed.), Denver, Col.: National Conference of State Legislatures, 1980, pp. 83, $5.00, paperback.

A Legislator's Guide to Oversight of Federal Funds, Win- nefred M. Austermann, Denver, Col.: National Con- ference of State Legislatures, 1980, pp. 81, $5.00, paperback.

One need not be a latter-day disciple of John C. Calhoun or Alexander H. Stephens to advance the thesis that the role of the states in the American political system has changed over the past two hundred years. "Events and trends have altered the fiscal, functional and political bal- ance within the federal system and have rekindled debate over the proper division of powers and responsibilities among the constituent governmental units," the Advisory


Commission on Intergovernmental Relations recently reported. Scholars have traced the continuing controversy between the doctrine of "dual federalism" (with separate and distinct powers presumably divided between the nation and the states) and the theory of "cooperative federalism" (with its assumption that intergovernmental partners shared obligations for funding and providing public services). For years, political scientists have amused each other with debates over "layer cake" and "marble cake" concepts of federalism, but perhaps the most appropriate imagery for the system-in-transition is the "upside down cake"-the inversion of power. An examination of recent literature reveals that revisionism is occurring within the ranks of those who once espoused active national involvement in state and local affairs. Even Daniel Elazar, the academic heir to Morton Grodzins, has conceded that within the past half century some officials in Washington abandoned self-restraint, transcended traditional boundaries, and sought to transform subnational governments into decentralized arms of the United States government.'

In many respects, the Reagan presidency may be viewed as midcourse correction in federal-state relations. In his in- augural address, the incoming chief executive announced his intention to "demand recognition for the distinction between the powers granted to the Federal Government and those reserved to the states and to the people." He told his

Leonard P. Stavisky is chairman of the New York State Assembly Education Committee. Nationally, he serves as chairman of the Education Committee of the National Conference of State Legisla- tures and as a commissioner on the Education Commission of the States. He holds a Ph.D. from the Graduate Faculty of Political Science of Columbia University where he is adjunct professor of Public Affairs.



Documents

Intergovernmental Relations: The Future Is Now