Federal Funds in State Budgets


The Federal Funds in State Budgets would significantly increase transparency on the federal government’s coercion of the state through the manipulation of federal fiscal assistance to the states. It would require the state’s budget bureau or fiscal board to identify all the conditions attached to significant sources of federal funds in the state budget, and categorize them according to whether the conditions affect how the federal funds are spent, or instead affect what the state does with its own funds and regulatory authority. If enacted, by operation of law it designates conditions attached to matters other than how the federal funds are to be spent as coercive conditions for purposes of state law, and declares it the policy of the state to resist all such conditions and to work together with other states to end such federal programs. This Act seeks to “operationalize” Justice O’Connor’s dissent in South Dakota v. Dole (1987) and the Medicaid portion of the Supreme Court’s ruling in NFIB v. Sebelius (2012).

Federal Funds in State Budgets

An Act to create [section ______] of the statutes; relating to: [state legislative budget bureau] reports on federal funds in the state budget, and the conditions attached by federal law and federal regulation thereto, including related guidance.

The people of the state of [state_____], represented in senate and assembly, do enact as follows:

Section [_____] of the statutes is created to read:


(a) In this subsection, “federal funds” refers to any federal grants in aid or other federal funds that are included in each budget bill.

(b) The [state legislative budget bureau] shall prepare a “Coercive Federal Funds Report” on each budget bill. The report shall contain all of the following:

  1. A detailed description of each source of federal funds in the budget bill [that exceeds $5 million in the aggregate]; and
  2. A detailed description of the conditions that must be met for continued eligibility for each such source, based on relevant federal law, regulations and guidance. The description of the conditions attached to each source shall be clearly separated into the following three categories:
  3. Conditions that describe the manner in which the federal funds must be spent.
  4. Conditions that describe the manner in which any related non-federal state or local funds must be spent, including “maintenance of effort” and similar requirements.
  5. Conditions that relate to policy matters other than the manner in which federal, state, or local funds must be spent.

(c) The conditions described in (__)(b)(2)(b) and (__)(b)(2)(c) shall be deemed “coercive federal conditions,” and the related federal funds shall be deemed “coercive federal funds.”

(d) The Attorney General is hereby authorized to bring suit in federal court to enjoin the application of any and all such conditions.

(e)  It is the policy of the state of [______] that federal programs that contain coercive federal conditions are unconstitutional and incompatible with the federal structure of the United States Constitution, and with the Constitution’s guarantee of a democratic representative government for the states. It is the policy of the state of [____] to work with other states in ending all such federal programs, and replacing them as necessary with state programs that reflect the preferences of the residents of the state of [____]. The governor shall consult with the governors of other states to develop a coordinated approach to issues relating to coercive federal funding programs.