March | April 2017

Both Sides Important But Balance is Needed

By Mary Branham, CSG Managing Editor
Mike Leavitt, the chairman of Leavitt Partners, served as governor of Utah from 1993 to 2003, then served as administrator of the Environmental Protection Agency and secretary of the U.S. Department of Health and Human Services during the Bush administration. He’s seen the principles of federalism from both the state and federal perspective.

What has happened to federalism over the past few decades?

“For nearly 75 years the influence of states has eroded. This is a result of federal expansionism and a collective state apathy among state leaders in defending their constitutional role as a counterbalance to federal power.”

Why does the federal-state relationship matter?

“The Constitution of the United States contemplated that state governments would provide a check and balance to federal power. The consequence of state’s failure to address certain problems, their willingness to be co-opted with federal money on others matters and a general ineffectiveness in challenging federal expansion has produced a federal government that is out of control financially and creating great inefficiency through continual attempts to micro manage functions that belong at the local level. This has contributed substantially to a cynicism and lack of confidence in government generally.”

In an ideal world, how would the principles of federalism operate in
today’s United States?

“We need a strong national government. However, things would work better if the federal government would limit the things it tries to do. Ideally the federal government would concentrate on the enumerated roles only a national government can accomplish. I’m referring to things like national defense, foreign policy, economic policy, interstate commerce and civil rights. In its interactions on matters where federal and state roles overlap, the federal government would be about establishing national objectives and policies, operating in a less prescriptive matter—allowing the laboratories of democracy to do their magic.”

Why is it important to return more power to state and local governments?

“In most cases, the best government is within driving distance. For the most part, people have more confidence in their state government. State governments are more efficient and accountable. States have to balance their budget.”

What will it take to restore the ideals of federalism?

“Only through state activism and a cooperative Supreme Court will the federal and state imbalance be remedied. Water will run uphill before the Congress voluntarily gives up power.
In the mid 1990s, states worked together in offering Congress solutions to a welfare system out of control. A Republican Congress and President Clinton, a former Democrat governor who understood the role of states, enacted reforms that dramatically improved the program and reduced its cost. There was a grand bargain. More state flexibility was granted in exchange for states agreeing to accept less money. It has worked.”

How difficult would that effort be?

“This is hard. If it was easy, it would have happened already. There is an inherent understanding among state leaders that the federal government is out of control. However, it’s hard for states to coalesce working from 50 state capitols in a way that competes with 535 people working in the same building.
“The most important asset states have is the distrust people feel intuitively for the federal government. However, to unleash that, states have to propose solutions to the problems people care about.”

One of the biggest issues that seems to emerge when talking about the
state-federal dynamic is the polarization in our political system.
What is your take on that?

“Politics will always play in the relationship between the states and federal government. Governors and state legislators need to pay less attention to their partisan flags and more attention to state/federal politics. States share a common interest in this struggle and too often, state leaders neglect their role as a state constitutional leader and act like supplicants to the federal government.
“Likewise, state government organizations need to pay more attention to federalism.”

How has the federal-state relationship changed since you were
governor of Utah in the 1990s?

“Sitting on both sides of the state/federal table left me with a real appreciation for the importance both play. One only need look at the numbers related to total state and federal budgets to understand that the federal government just continues to become more powerful. 
“I believe health care and homeland security are the two most significant categories of state eroding influence. In both cases, the federal government has used its capacity to tax and incur massive debt to entice states into giving up power. There are entire categories of state function that legislatures depend almost completely on federal appropriations to fund. The consequence is that through it the sign on their doors may say ‘state government,’ but they operate like branch offices of the federal government.”

If you had it to do over again—and you could be involved in the effort—
how would you shape health care reform that takes into consideration the
individuality of each state’s circumstances?

“It is difficult to answer such a question in limited words. However, as a start, I would encourage federal legislation that established a national expectation each state would develop a plan to assure that within a specific time limit every citizen can buy an affordable health insurance policy. I would allow states great flexibility and provide them with a series of tools. I would make clear if a state failed to accomplish the goals, federal support would diminish. To the degree the federal government provided money for subsidies, states would decide who was subsidized and how. States would be given the capacity and tools required to completely redesign the Medicaid system.
“Perhaps most importantly, I would use all the tools at my disposal to hasten the transition away from fee-for-service payment within health care and encourage the marketplace to adopt risk based payment systems where incentives between patients, payers and providers are aligned.  This would include policies to have Medicare and Medicaid leaning forward to such a system. 
“I would structure the system to engage consumer choose through private and state operated public exchanges. Any subsidies provided would be spendable on private exchanges as well as public exchanges. Consumers would be heavily involved in the selection of their plans and armed with information about cost and quality.”  

The U.S. Advisory Commission on Intergovernmental Relations, which
operated from 1959 until 1996, provided a forum for state and local
governments to have serious policy talks with federal counterparts.
Some say it’s time to revive such a forum. Is something like this commission
needed or are there other ways to improve those relationships?
If so, what would that be?

“The commission played a valuable role at various times throughout its history.  However, it became marginalized by Congress toward the end. Such a forum would be valuable only if it had some means of inserting itself into the debate.  For example: What if such a commission had the power to issue State Government Impact Statements on Congressional legislation?”

The EPA recently issued new regulations limiting the greenhouse gas
emissions for new power plants. Do you see any legal challenges arising
from industry or states?

“The EPA has assumed the posture that as long as their party controls the White House and one chamber of the Congress, that they are free to interpret the limits of our power in the aggressive way possible—and who’s going to challenge us? Setting aside for a moment the question of global warming to focus just on the governance issues involved, states and industry should and will challenge this action. This is a classic example of how the federal government usurps power of states.”

What implications would the administration’s intended new greenhouse
gas regulations have for states, especially for those reliant on coal-burning
power plants?

“The United States is currently within a window where achieving energy independence is within our grasp. The development of clean coal technology and the continuation of policies and practices that harness our national gas resources could change our nation’s dependence and return economic vibrancy to our nation.”