FEDERALISM

Federalism Forges On

When considering where American federalism is today, it’s helpful to remember where it all began. JULY/AUGUST 2018 14 STATE LEGISLATURES FEDERALISM

By Max Behlke and Julie Lays

veryone’s got their limits. The federal enforcement power, it was unable to address Civil War, a conflict fought over slavery, but government and the states have been conflicts between the states. And because it partly on the grounds of state sovereignty. testing each other’s ever since the ink took unanimous state support to amend the The amendment enshrined the due process Edried on the Constitution. articles, change was nearly impossible. and equal protection clauses in the Consti- The state-federal relationship has been tution to protect the newly freed slaves from both challenged and strengthened recently Something New Was Needed arbitrary and capricious state actions. by important U.S. Supreme Court deci- The obvious need for a new national Then came World War I, which drasti- sions and by congressional and executive framework is what led to the 1787 Constitu- cally increased federal power, followed by actions, proving once again that our system tional Convention. During that hot, muggy the nationalization of the railroad, tele- is strong yet pliable—and that it’s come a summer in Philadelphia, state delegates vigor- graph and telephone, along with federal long way from the steamy summer of 1787. ously debated, compromised and, ultimately, involvement in labor relations, manufac- That’s when 55 men met in Philadelphia to agreed to the new national framework. turing and commerce. draft a framework for the new nation: a con- Convincing nine of the 13 state legislatures The Great Depression ushered in Pres- stitution. Their months of debate culminated to ratify it, however, was no small task. Sup- ident Franklin D. Roosevelt’s New Deal, in the creation of a document that changed porters and opponents alike penned letters expanding the role of the federal govern- our country and the course of human history. to newspapers, praising or condemning the ment still further, this time through a series Of the world’s roughly 160 national con- document. Many felt that the Constitution of domestic programs to jump-start the stitutions, the U.S. Constitution is now the usurped their state’s authority to self-govern. nation’s shattered economy. oldest written one; nearly all the others bor- That’s where the genius of Alexander Ham- After World War II, the U.S. govern- row from the work created in Independence ilton comes in. His essays, along with those ment emerged as a world power with the Hall. The longevity, durability and near by James Madison and John Jay (known col- largest financial system. Ever since, it has universal support of our Constitution is a lectively as “The Federalist Papers”), on the used its significant resources to influence, testament to its genius. But when it was first virtues of the new Constitution’s system of persuade, help and hinder events and behav- made public, Americans were skeptical. governance, won over the skeptics. ior within the states and around the globe. States, and their citizens, had fought for American federalism—where democ- During and after the Cold War, the fed- the principle of state sovereignty during the racy rules and the power to govern is eral government remained in the driver’s seat Revolutionary War and were understandably shared among the states and the federal with President Lyndon Johnson’s civil rights hesitant to replace a king with another dictator government—has evolved from the time of campaign and “War on Poverty,” President in the form of a dominant federal government. Hamilton, of course. Often, the most sig- Richard Nixon’s “New Federalism,” which However, the Articles of Confederation nificant shifts in the balance of power were set up revenue-sharing programs, and Pres- under which they were living weren’t working. driven by necessity or moral imperative. ident Ronald Reagan’s block grants in 1987. The national government couldn’t levy taxes Almost all, however, ended with the federal So where are we now? Will the states ever and was chronically underfunded. With little government gaining authority. again enjoy the sovereignty they had at the advent of the republic? That’s hard to say. Max Behlke is the director of budget and tax The Road to Now The balance of power between the states and policy on NCSL’s State-Federal Affairs team. Julie Lays is the editor of State Legislatures. Lisa Many scholars argue that the beginning the federal government continues to shift. Soronen, of the State and Local Legal Center, of this federal expansion began with ratifi- Charges of federal overreach fired the contributed to this article. cation of the 14th Amendment following the debate over the Affordable Care Act,

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enacted in 2009. Opponents of the law With a dysfunctional Congress, and an physical presence in a state to avoid collecting argued the federal government did not have unpredictable president, “We could be wit- state sales taxes. Justice Anthony Kennedy, the authority to dictate state health policy. nessing the most radical reshaping of feder- writing the majority opinion in the Wayfair They also resurrected the states’ insistence alism—the division of responsibilities across case, stated, “In the name of federalism and that “Congress not solve its tough prob- multiple levels of government—since the free markets, Quill does harm to both. The lems by dumping the hard issues on the New Deal,” Bruce Katz, of the Brookings physical presence rule it defines has limited states—without providing money to pay Institution, said in a speech last year. states’ ability to seek long-term prosperity for them,” writes Donald F. Kettl, a for- “States, local governments, private and has prevented market participants from mer dean of the School of Public Policy at business and civil society are filling the competing on an even playing field.” the University of Maryland. vast vacuum at the center. This is the In another case decided this term, Mur- From health care to education, tax pol- Next Federalism—messy, uneven, chaotic, phy v. NCAA, the high court struck down icy to the environment, many feel the fed- ground-up and quintessentially Ameri- the Professional and Amateur Sports Pro- eral government has stepped over the line can,” Katz wrote back in 2014. And that tection Act, a federal law that banned states into state authority too often, inserting still seems to be the case. from legalizing sports betting, thus giving itself in nearly every area of governance. President Donald Trump’s actions have oversight of gambling to the individual both alarmed and charmed state officials. states. In an amicus brief, filed by the State Is Change a-Comin’? Are they state-friendly or not? From elimi- and Local Legal Center, representing the Some see the state-federal pendulum nating environmental regulations to threat- National Conference of State Legislatures swinging back toward states and localities. ening aluminum and steel trade wars, his and other state and local organizations, the In the last generation, “We’ve evolved policies and actions defy categorization Supreme Court was asked to rule PASPA from a federalism that was largely about and predictability. unconstitutional because it violated the state and local governments asking for Then there’s Congress, so polarized it’s Constitution’s anticommandeering doctrine. money from Washington to one focused on unable to lead. With half the members Justice Samuel Alito, in writing the majority allocating power between the center and the coming from state legislatures, how do they opinion, stated that PASPA “unequivocally provinces,” writes Kettl. “Alexander Ham- so easily forget their roots and try to pre- dictates what a state legislature may and may ilton himself would have recognized many empt state sovereignty on so many issues? not do. … State legislatures are put under of the recent frictions. But some of the new the direct control of Congress. It is as if fed- tensions are ones that would have been hard Questions Remain eral officers were installed in state legislative to imagine in 1987, let alone 1787.” Will the federal courts, in particular the chambers and were armed with the authority Disasters, man-made and natural, Kettl U.S. Supreme Court, be more likely to main- to stop legislators from voting on any offend- writes, have shown states they can no longer tain the federalism balance than Congress? ing proposals. A more direct affront to state count on the federal government to provide A couple of big Supreme Court cases went sovereignty is not easy to imagine.” for their security. The 9/11 terrorist attacks, in states’ favor, allowing them the freedom Regardless of one’s views on these issues, and Hurricane Katrina four years later, to govern and raise revenue as they see fit. the court’s recognition of state sovereignty is tested the readiness of localities and states to The South Dakota v. Wayfair ruling opened significant. It could be a sign of things to come. provide the first response. “It established a the door for states to require remote sellers, Our system of federalism is not the gov- new reality: Big national crises increasingly many of which are online sellers, to collect ernment our forefathers could have envi- begin as local events, and the early stages the sales taxes on transactions made by the sioned; still, the framework those visionary of response depend on the capacity of local state’s residents. That struck down the Quill men constructed 231 years ago has proved governments to act effectively.” ruling, which allowed businesses without a its durability through changes big and small.

JULY/AUGUST 2018 16 STATE LEGISLATURES FEDERALISM Supreme Court Hands Federalism a Victory

n June 21, the U.S. Supreme roadblock, especially in the House, Court acknowledged the NCSL Executive Committee that the “laboratories of Task Force on State and Local Odemocracy” are working. Taxation in 2015 altered our strategy In South Dakota v. Wayfair, the court, to include bringing a case before in overturning its 1992 Quill decision, the U.S. Supreme Court to overturn ruled that states can require out-of-state Quill. The task force, through our sellers to collect and remit applicable Executive Committee, prepared sales tax on purchases made by in-state draft legislation to share with state consumers. This decision will afford legislatures that wished to pass laws states the ability to enforce their existing challenging Quill. South Dakota’s sales tax laws on all sellers, not just legislation, sponsored by NCSL in-state, job-creating businesses. No President Deb Peters, was the first more, no less. law ready for Supreme Court review. Over the course of our republic, the The Supreme Court accepted the federal government has continually South Dakota case in January 2018 eroded the sovereignty of states. On and held oral arguments in April. June 21, however, the laboratories On June 21, in a 5-4 decision, the of democracy triumphed. This is a court removed the physical presence tremendous, yet long overdue, victory standard it established in Quill, which for federalism, main street retailers, stated that a business must have states and the National Conference of physical presence in a state before the questions you may have and about State Legislatures. that state could require the business next steps. NCSL will hold a special For the last 20 years, NCSL’s to collect and remit legally imposed session on the remote sales tax at the membership has advocated for passage sales taxes. Writing for the majority, Legislative Summit in Los Angeles. of federal legislation to close the Justice Anthony Kennedy stated that, Finally, I want to thank all of you ever-growing loophole on sales tax “In the name of federalism and free who have stood up for your states, your collection. NCSL’s Washington office markets, Quill does harm to both. The businesses, and with NCSL through our staff and the thousands of legislators physical presence rule it defines has tireless efforts on Capitol Hill and in over the years who joined us for Lobby limited states’ ability to seek long-term the courts. Without a doubt, the states’ Days, led the advocacy efforts on prosperity and has prevented market success was due to your efforts and the Capitol Hill. Even though our efforts participants from competing on an support of NCSL through this 20-year led the Senate to overwhelmingly pass even playing field.” This has been endeavor. the Marketplace Fairness Act in 2013, NCSL’s argument for 20 years. —William T. Pound we could not get legislation to the As you begin to ponder what this finish line. means for your state, please know that William T. Pound is executive director of the In lieu of the congressional NCSL experts are ready to assist with National Conference of State Legislatures.

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