States to Test the Federal Boundaries

November 5, 2013

The Supreme Court struck down a provision in ObamaCare that threatened states with the loss of all Medicaid funding if states refuse to expand their Medicaid programs as prescribed in the health reform law. In essence, the states are therefore free to ignore the threat, says Mario Loyola, chief counsel at the Texas Public Policy Foundation.

The Court's ruling has significant implications for other sources of federal funding in the Texas state budget.

  • According to the February 2013 report of the Texas Legislative Budget Board, there are more than 400 sources of federal funds in the Texas budget, totaling about 35 percent of the Texas All Funds budget for fiscal year 2012.
  • Many of those programs have been conditioned on states' acceptance of new programs, just like the scheme struck down in the ObamaCare decision.

The flexibility that the Supreme Court gave to the states is far short of what states will need to be free of federal coercion. In order for states to combat federal overreach, it is vital that they develop ways of combating the allure of "free" federal money.

  • One way is to resist coercive conditions attached to federal programs, by arguing in the courts and to Congress that state policies and spending priorities are improper subjects for federal manipulation.
  • It is vital for states to work together in confronting the coercive reach of federal funding programs.

The Supreme Court's decision in the ObamaCare case to strike down the broad penalty for refusing to comply with the Medicaid expansion constitutes a significant victory for the Constitution and its Tenth Amendment. The ruling could grant states expansive new flexibility to modify or withdraw from programs without losing the funds that Congress thought it could use to cudgel the states into compliance with its endless stream of new programs. Now it is up to the states to test the boundaries of that new flexibility -- and to push back everywhere that federal coercion comes attached to a dollar of federal "assistance."

Source: Mario Loyola, "Loosening the Federal Straightjacket: How the NFIB Decision Affects Federal Funds in State Budgets," Texas Public Policy Foundation, October 2013.

 

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