Coercion, the ACA Spending Clause Opinions, and the Future of Cooperative Federalism

In the spending clause portion of yesterday’s ACA opinions, Justices Kennedy, Scalia, Alito and Thomas offered an interesting perspective that, if ever adopted by a Court majority, could raise serious questions about the viability of the “cooperative federalism.”

To begin, let’s assume the principle underlying the limits on the federal government’s spending power, as the doctrine suggests, is whether states are “coerced” into accepting the federal government’s “offer” of funding or have the ability to decline. As I’ve written about in my book, Stem Cell Century, in the context of scientists offering women money to provide ova for scientific research, whether an offer is considered “coercive” should depend on whether the offeror threatens to deprive the offeree of something if she refuses the offer to which she has a pre-existing legitimate expectation.

Based on this standard, I think Justice Roberts basically got the conclusion right in his opinion yesterday for himself and Justices Breyer and Kagan, although not exactly for the right reason. It isn’t directly relevant whether the Medicaid expansion marks a “new” program or just a significant change to the existing one, as Roberts seems to believe, but whether the states have a legitimate expectation of ongoing funding for their current Medicaid obligations. Given the long-standing establishment of the current program and its centrality to state government, threatening to take away current funding is coercive, under my definition (with a possible exception for “minor” changes to an existing program if the costs to the feds of administering the program would be high if some states opted into the changes and others opted out). Justice Ginsburg’s rejoinder that the states aren’t really entitled to any federal Medicaid payments because Congress could eliminate the program completely at any time and could also eliminate the current program in its entirety and then legislate a new, more comprehensive Medicaid program is too formalistic. In reality, no reasonable state officer would believe Congress actually might eliminate the entire Medicaid program tomorrow.

Of course, it is not coercive to threaten not to give the states any additional money unless they agree to Congress’s Medicaid expansion requirements, because the states never had any legitimate expectation of this new funding. Or did they? This is where the concurrence (on this issue) of the four conservatives gets interesting. The conservatives seem to be bothered by two aspects of conditional federal grants to the states. Like Roberts, they are concerned with the federal government making it difficult for the states to decline new federal grants as a consequence of a federal threat to deprive them of preexisting federal grants. But they are also concerned with the fact that, if a state declines the federal money, not only does it lose out on federal benefits, it has to pay its share of the federal grants to the states that do accept the conditions. What the Justices mean, of course, is that the citizens of the states that decline contingent federal grants still have to pay federal taxes, and part of those federal taxes will support the contingent federal grants. This bothers the conservatives because this increases the cost of turning down the federal grant. Assuming that the state wants to provide some particular kind of service, just not according to the federal terms and conditions, turning down the federal grant means the state pays twice. First, it sends its money to Washington to finance the states that accept the federal terms, and then it has to tax its citizens again in order to pay the cost of providing the service in its state on its own terms.

It is always the case that if you turn down a subsidy from someone because you don’t like the conditions that accompany the subsidy, you then have to pay the full cost yourself. But this doesn’t make a contingent offer coercive… it just makes it a good alternative that is tough to turn down because it is so potentially beneficial. But the conservative Justices seem to be suggesting that a state has some kind of legitimate claim on the money that its citizens pay in federal taxes, such that “threatening” to send that money to other states that agree to its conditions while not sending a fair share back to the state that declines the federal grant makes the state worse off than its legitimate-expectation baseline.

The opinion doesn’t come right out and state this so bluntly, but that seems to me to be the strong implication of all the focus the conservatives’ opinion places on how difficult it is for a state to decline a federal grant that other states are willing to accept. Suggesting that the states have some legitimate claim on to the return of federal tax dollars collected within their borders is not only revolutionary, it has far reaching implications. If this proposition were ever accepted as correct, it would seem to be a death knell for cooperative federalism. If “state money” is being used to a support federal grants to states, the offer of a conditional federal grant would seem to pose the threat not only of not giving the state the grant if it refuses to accept the conditions, but also of taking away “its money” if it refuses to accept the conditions. A federal “threat” not to give a state federal money would not make the federal offer coercive. A federal threat to take the state’s money would make an offer coercive, even if the federal grant program were entirely new and the state had no legitimate pre-existing claim on federal resources for that purpose.