MY LAST NERVE: State Sovereignty for Federal Cash

March 7, 2014

Inside Insight

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virginia and north carolina mapState-funded higher education institutions – as well as some lawmakers – are upset. What about? The possibility that they may be treated the same as other state-funded agencies and departments under a legislative proposal in the Senate.
A recent piece in The State highlighted concerns from colleges that a Senate proposal to slow the effects of Obamacare “effectively could bar state colleges from receiving millions in federal dollars.” Officials with the University of South Carolina specifically expressed concern over the school’s ability to “compete for federal research funding” and their “ability to recruit and retain high-tech companies.” The article noted that about a third of the school’s grants, including for basic research, are from health-related agencies.
On the floor of the Senate Wednesday, Sen. Marlon Kimpson (D- Charleston) asserted that under the Senate proposal, “state agencies and political subdivisions cannot apply for funds under the ACA [Affordable Care Act].”
That’s not true, and it’s worth explaining why.
Sen. Tom Davis (R- Beaufort) has filed a strike-and-insert amendment to H.3101 – a bill formerly purporting to “nullify” Obamacare – that would, among other things, require that federal Obamacare dollars be treated on a contractual basis. Essentially the amendment, if passed into law, establishes a process by which all state entities, before applying for and accepting federal dollars, would explain – in detail – what the money is for, the strings attached to those funds (regulations, mandates), and any affects those provisions would have on individuals and businesses. Agencies and departments would not be allowed to request or accept federal funds tied to the Affordable Care Act not specifically listed in the governor’s executive budget. Each program funded in whole or in part by ties to the ACA would receive an up or down vote in both legislative chambers. The entire process would be repeated annually.
The purpose of the amendment is to make it clear to the public the ways in which the acceptance of federal money would force the state to cede policy prerogatives to Washington, and the ways in which doing so would affect businesses and individuals in South Carolina. Senator Kimpson suggested the process would cripple state agencies. “We should not hamstring, and place obstacles, in the way of state agencies to maximize grants provided under the Affordable Care [Act].”
On the contrary, scrutinizing decisions to exchange state prerogatives for federal cash is precisely the kind of thing we should have been doing for decades. Giving free reign to government agencies to apply for and accept every dollar the federal government makes available has led to disastrous policies and, overall, a $17 trillion national debt. Some examples of disastrous policies:
  • The state accepted millions of federal stimulus dollars, part of which increased the federal share of Medicaid from 70 to 79 percent. The stimulus law explicitly forbids states that accepted Medicaid bailout dollars from making eligibility more restrictive – effectively stopping the state from auditing its Medicaid rolls for fraud.
  • The state was apportioned $651 million from the Federal Highway Administration in 2011, but those dollars can only be used on about half of the state’s roads, and often help promote new expansionary projects that generate more miles of road for the DOT to maintain. Further, the Department must divert funding from maintenance to new projects in order to meet the match required to receive dollars from the Federal-Aid Highway Program.
  • The state wanted out of the increasingly onerous requirements of the No Child Left Behind program, so it applied for waivers from the program in exchange for agreeing to specific conditions – conditions virtually identical to those later formulated in the Common Core State Standards. In effect, we could get a partial waiver from No Child Left Behind if and only if we signed up for Common Core.
Federal funds account for more than one-third of South Carolina’s state budget. In 2013, the state received roughly $9 billion in federal funds. It is clear that the state is heavily dependent on federal aid to support many core government functions. Dependency invites control – control over the lives of its citizens, over the operations of our businesses, and over the policies of our government.
Nor is any of this somehow forced on the state. Our senators, representatives, and governor, through the acceptance of these dollars through the state budget each year, surrender state sovereignty and invite federal control. The only way to limit that control is to create an air-tight process in which our elected officials must publicly disclose and debate the funds they are requesting from the federal government. And that’s exactly what Sen. Davis’ proposal would do with regard to federal funds tied to the Affordable Care Act.
From healthcare to education to transportation, no state program, agency, entity, division, or department should be exempt from public scrutiny. If that’s called “hamstringing,” so be it. What’s your view?
Jamie Murguia is Director of Policy at the S.C. Policy Council