Starlee Rhoades

Interactive Fact Sheet: Federal Programs Limit Legislature's Budget and Policy Options

Posted on June 03, 2008 | Type: Press Release | Author: Starlee Rhoades
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Phoenix-- Arizona is awash in federal money, almost $8 billion this year.  While this growing pot of money seems attractive, there is a catch.  Most federal money requires state matching funds.  As more federal dollars come in, more state dollars are committed to federal programs.  Indeed, the state legislature has direct appropriation authority over only 25 percent of state spending.

A new Goldwater Institute report, Arizona's Struggle for Sovereignty: The Consequences of Federal Mandates, by Senior Fellow Benjamin Barr, describes how federal programs drive Arizona state spending and reduce the legislature's control over budget and policy decisions.

Click here to view the executive summary and recommendations.

Click here to download the entire report.


  • Allow citizens and businesses to opt out of paying taxes for programs in which their state is not participating.
  • Amend the U.S. Constitution to prohibit federal mandates that require states to use non-federal funds to pay for them.
  • Create a "states' veto" amendment to the U.S. Constitution, under which a majority or supermajority of state legislatures could vote to block unwanted federal mandates.
  • Expand the reach of the federal Unfunded Mandates Reform act so that it is applied more robustly.
  • Repeal two provisions that tie the hands of Arizona legislators -- Proposition 204 and the 1998 Arizona Voter Preotection Act.
  • Resist any proposal to further expand AHCCCS. While Medicaid does mandate the coverage of certain population groups, many states, including Arizona, have expanded coverage to optional services and population groups for which coverage is not mandated by the federal government.
  • Opt out of No Child Left Behind, the federal government's education program.
  • Seek judicial redress in three areas:  1) reaffirm the U.S. Constitution's promise of state sovereignty; 2) revisit the interpretation of the taxing and spending clause of the U.S. Constitution; and 3) include language protecting states from unfunded mandates in federal statutes.

Fast Facts and Links to Sources, More information

  • The Arizona legislature directly appropriates only 25 percent of total state spending.
  • Arizona will receive close to $8 billion in federal funds in 2008.  This sum represents about 29 percent of Arizona state expenditures.
  • Largely propelled by federal matching grants, Arizona's real per-capita spending rose from $3,115 in 1992 to $4,157 in 2005, and increase of one-third.
  • Federal matching-grant formulas make state-level budget cuts very costly.  For example, when Arizona cuts itsMedicaid spending by $1.00, overall Medicaid spending is reduced by $2.92.
  • Arizona State General Fund spending for Medicaid has risen from $463 million in 2000 to a projected $1.3 billion in 2008.  Medicaid spending now accounts for 12 percent of General Fund spending, up from 8 percent in 1998.
  • Federal funding formulas give states large incentives to expand their programs.  For example, Arizona's Medicaid program expanded significantly in 2000, and now 20 percent of Arizona's populaltion receives Medicaid benefits.
  • No Child Left Behind, the federal education law, provides roughly 6.5 percent of funding for Arizona K-12 education.  But it accounts for thousaneds of hours in compliance time and costs.  With federal funding, eeucation -- which has traditionally been a state and local concern -- has become increasingly federalized.
  • The Arizona Legislature's ability to appropriate funds and deal with budget deficits is severely hampered by federal mandates.  Arizona voters have passed laws that limit what legislators can do, too.

Approved Quotes

"The people of my state -- and I am confident that I speak for the majority of them -- have long since seen through the spurious notion that federal aid comes free." Senator Barry Goldwater, The Conscience of a Conservative.

"Federal funding in Arizona displaces the Legislature's authority to act on its own" Benjamin Barr

"Federal funds distort legislative policy preferences and priorities, place bureaucratic agencies beyond legislative control, and lock the state into expensive funding commitments." Benjamin Barr

"As a state's reliance on federal mandates increases, the nation's underlying system of federalism shifts from one of partnership to a master-servant relationship." Benjamin Barr

"When the states have reached their limit, they can bring their federal taskmasters to accountability by bringing litigation defending the sovereignty of the states." Benjamin Barr

"Whatever their form, federal funding programs tend to expand state budgets." Benjamin Barr

"By making expansions look cheap and cuts outrageously expensive, federal programs tend to exacerbate the statesa' boom-and-bust budget cycles." Benjamin Barr

"The erosion of the Arizona's legislature's appropriation authority has reached troubling proporitions." Benjamin Barr

"Currently, states can opt out of participating in federally funded programs, but NOT out of the payments for those preograms. This fiscal asymmetry helps to explain the universay state participation in virtually all federal programs." Benjamin Barr

"Increased federal mandates offer homogeneous, national policy solutins for diverse, local problems." Benjamin Barr

"Several states have contemplated a unilateral withdrawal from No Child Left Behind funding and mandates.  Arizona can and should take that step." Benjamin Barr

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