Supreme Court to Weigh in on Federal Grants

November 21, 2011 | By Thompson Education | Post a Comment

(This post originally appeared on Title I-Derland, Thompson’s blog on federal K-12 education and was written by Chuck Edwards, senior executive director for Thompson’s education products.) Responding to the Supreme Court’s Nov. 14 decision to consider a constitutional challenge to the new health care law, the media have focused on the law’s controversial requirement that everyone buy health insurance (the so-called “individual mandate”). But they have generally overlooked an even more momentous question that is part of the same case: the power of the federal government to require states to perform actions as a condition of federal aid.

The plaintiffs’ challenge to this traditional quid-pro-quo has profound implications for the entire grant-in-aid structure, comprising $600 billion in federal aid to state and local governments for such diverse purposes as education, highways, and housing.

Of the five-and-a-half hours scheduled for arguments on the constitutionality of President Obama’s Affordable Care Act, one hour will be devoted to the law’s expansion of Medicaid to cover additional low-income people. Medicaid, which is operated by states with the help of federal subsidies, constitutes about 40 percent of all federal aid to states.  Although the federal government will bear most of the costs of the mandated expansion during the first six years, states must assume the costs thereafter. In response, a number of states have complained that they can’t afford those additional costs, but they also can’t afford to opt out of Medicaid entirely because it would leave so many of their citizens without health care. They want the Court to decree the expansion unconstitutionally burdensome under the Tenth Amendment (which reserves certain powers to the states).

Among the first to note the implications was Brad Joondeph, who wrote in the ACE Litigation Blog:

Again, the really big news of the morning — if there is anything surprising — is that the Court has decided to take up the constitutionality of the ACA’s Medicaid amendments. Specifically, the question is whether the spending conditions that the ACA imposes on the states are effectively “coercive,” such that they amount to an impermissible commandeering [of state powers]. There is no split on the question, and no lower court judge has yet voted to uphold the states’ claim. But the Court will take it up.

As a purely legal matter, this is a bigger issue than the individual mandate. For much of the modern liberal state is underwritten by Congress’s use of the conditional spending power.

The last time the underlying question reached the Supreme Court was in the 1987 case of South Dakota v. Dole, 483 U.S. 203, 211 (1987). In this case, South Dakota objected to the federal government requiring states to set the drinking age at 21 or suffer a 5 percent cut in their annual highway safety grants. The High Court said that if a state does not want to accept the conditions attached to a federal grant, it is perfectly free to turn the money down.

The implications of the court’s decision to once again take up this question are obvious: All federal grants are founded on the conditional spending power. If the sheer price tag on the Medicaid expansion elevates the normal grant strings from “conditional” to “coercive,” this may open other grants to challenge. Is the $14 billion Title I program coercive? Is the regulation-ridden, $12 billion IDEA program coercive?

Most ominous for grant advocates is the fact that the High Court took up this issue despite the fact that lower courts have uniformly adopted the Dole precedent. The Court normally only considers cases when lower courts disagree. This indicates a particular interest in revisiting the issue, which means that someone on the bench may be interested in overturning Dole — as well as a fundamental principle underlying most federal aid to states.

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