Federal-State Relations Under Grants-in-Aid

July 30, 1940

Report Outline
Role of Grants-in-Aid in Federal System
Expansion of System of Grants-in-Aid
Gradual Extension of Federal Control
Need for Revision of Federal-Aid System
Special Focus

Role of Grants-in-Aid in Federal System

Subsidies as Device for Joint Federal-State Action

The Last Decade has witnessed profound and far-X reaching changes in the American federal system. For more than a century, the federal government and the 48 state governments operated in separate spheres, largely independent of each other. In recent years, however, with the expansion of governmental services and the extension of regulatory controls over new sectors of the nation's economic life, the interests of federal and state governments have cut across jurisdictional lines and have become intermingled. To meet these new conditions, an intricate network of interlocking relationships between the two levels of government has been created—both by legislation and, extralegally, by administrative practice. Many observers believe that this trend is the most significant development in American government during the last decade.

In the development of closer federal-state relationships, grants-in-aid have played a leading role. Under the grant-in-aid mechanism, the federal government extends subsidies to the states to be used in carrying on particular governmental services; by accepting these subsidies the states give their assent to federal supervision over administration of the aided services. The states thus become, in effect, agents of the federal government in the performance of activities deemed by Congress to be clothed with a national interest.

Rapid growth of the federal-aid system in recent years is looked upon by some observers as a dangerous feature of the trend toward centralization of authority in the national government, carrying with it a threat to federal democracy. Most informed students hold however, that the grants-in-aid system operates to reenforce and preserve the states and that the alternative is complete federal assumption of services now financed and administered on a cooperative federal-state basis.

ISSUE TRACKER for Related Reports
Federal/State Government Relations
Apr. 27, 2018  Federal-State Relations
Oct. 15, 2010  States and Federalism
Sep. 13, 1996  The States and Federalism
Feb. 21, 1986  State Financing
May 24, 1985  Federalism under Reagan
Apr. 03, 1981  Reagan's ‘New Federalism’
Feb. 25, 1977  Resurgence of Regionalism
Apr. 07, 1971  State Capitalism
Dec. 23, 1964  Federal-State Revenue Sharing
Jul. 30, 1940  Federal-State Relations Under Grants-in-Aid
Jul. 03, 1937  Regional Planning and Development
Apr. 24, 1936  Reform of Municipal Accounting
Jul. 10, 1933  Regional Planning by the Federal Government
Dec. 13, 1924  Federal Subsidies to the States
State, Local, and Intergovernmental Relations