U.S. Government and Civics / Unit 3: Federalism
3.5 Fiscal Federalism
Notes
The national government uses money to influence states. This is fiscal federalism.
- Categorical grants: money for a specific purpose with strict conditions (for example, school lunch programs).
- Block grants: money for a broad area, such as community development, with more state freedom in how it is spent.
- Mandates: federal requirements that states must follow. An unfunded mandate comes without money to pay for it. The Americans with Disabilities Act imposed requirements on state and local governments.
- Conditions of aid: Congress can attach strings to grants. ***South Dakota v. Dole* (1987)**: Congress could withhold 5% of federal highway funds from states with a drinking age below 21.
- States generally prefer block grants; Congress often prefers categorical grants for more control.
Practice
The federal government gives a state money that may be used only for building bridges, with detailed rules. This is a:
Categorical grants are for a narrow purpose with conditions.
How did the national government get all states to adopt a drinking age of 21?
South Dakota v. Dole upheld this condition on federal highway money.
A state complains that a new federal rule requires costly changes but provides no money. The state is objecting to:
Unfunded mandates require state action without federal funding.
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