Handing over Control: The Role of States in Distributing Federal Benefits

• In Event: Federalism in Action

Abstract

The federal government consistently delegates discretion over the implementation of federal programs to states. Between the ninety-third and 111th Congress, McCann estimated that approximately 80% of significant legislations included such delegations (2015). Existing research on state use of such delegated discretion has generally focused on whether states apply for competitive grants-in-aid or whether states comply with federal requirements when implementing federal programs. In doing so, this research has largely ignored the variation in decisions made by states regarding federal programs that are largely within the guidelines of federal law but take advantage of the flexibility provided to states by design. Further, existing research has largely focused on the effects of such grants-in-aids on overall state-level spending, ignoring the possibility that even if state leaders spend equal amounts overall, they can differentially distribute those benefits among constituents.
This paper focuses on theorizing and measuring how differences in electoral incentives shape state leaders’ use of discretion delegated to them over federal programs. States make a variety of decisions when implementing federal programs. This paper focuses specifically on decisions made by state leaders as to how to distribute benefits and costs associated with the federal programs. I theorize that in evaluating such benefits and costs to recipients of being the target of a federal program, state leaders can come to different conclusions. For example, a federal program that is designed to incentivize private investment in an economically distressed community may have negative externalities if, for example, it contributes to the displacement of residents. State leaders’ concern regarding such negative externalities relative to the benefit of attracting new investments may reasonably vary across states. I theorize that such differences will shape who state politicians identify as recipients. More specifically, I theorize that state politicians will direct net benefits towards and net costs away from their electoral supporters to increase their chances of re-election. Further, I theorize that such effects will increase when state leaders face higher levels of electoral pressure due to, for example, an upcoming election. To test this theory, I leverage data on (1) school improvement designations and (2) census-level designations of Opportunity Zones. Political rhetoric regarding school improvement designations and Opportunity Zone designations implies that Democrats and Republicans view the costs and benefits of such designations differently. I find such differences affect the likelihood that states led by Democrats versus Republicans target their electoral supporters as program recipients. Further, the effects generally increase as the electoral pressure faced by state leaders increases. These findings are consistent with my theory.
A significant proportion of federal domestic policymaking is done through mechanisms, such as federal grants-in-aid, that delegate discretion over implementation to states. This paper aims to increase our understanding of how states use such flexibility to make different, yet largely permissible decisions in implementing those federal policies. Further, in considering potential negative externalities of being targeted by a federal program, this paper builds on existing research on intergovernmental grants and distributive politics to consider (1) that all receipts of funding are not necessarily costless and (2) that politicians’ disagreements on the costs and benefits of a program can lead them to make divergent decisions in implementing those programs. Thus, this paper aims to contribute to multiple lines of existing research.

Author

• Shelby Buono Shumard, Vanderbilt University