Are States Protected from Federal ‘Coercion’ or Not?

NOTE: This post originally appeared on The Corner on NationalReview.com.

Last week, writing for the Texas Public Policy Foundation, I filed an amicus brief in the 11th Circuit Court of Appeals on behalf of the 26 state attorneys-general who are challenging the constitutionality of Obamacare. The case is on appeal from the federal district court for northern Florida, where Judge Vinson struck down the law, holding that the individual mandate exceeds the power of Congress to regulate commerce “among the several States.” Most attention has focused on this aspect of Judge Vinson’s ruling.

Our brief, however, focuses on another part of Judge Vinson’s ruling, namely his extraordinary finding of summary judgment for the government on the Medicaid expansion provisions of the new health-care law. (See pp. 6-13 of the ruling.) The states had argued that these provisions, which require states to expand Medicaid rolls and absorb part of the cost themselves, constitute an unconstitutional commandeering of state governments through a coercive use of conditional federal funds. This issue tests the limits of the Spending Clause (rather than the Commerce Clause) of the Constitution. Among the controlling cases is South Dakota v. Dole (1987), in which the Supreme Court upheld a federal law that threatened states with the loss of five percent of federal highway funds if they did not raise their drinking age to 21. Writing for the majority, Chief Justice Rehnquist noted, “Our decisions have recognized that, in some circumstances, the financial inducement offered by Congress might be so coercive as to pass the point at which ‘pressure turns into compulsion.'” But in the years since Dole, federal courts have barely paid lip service to the principle of coercion, while in fact upholding virtually every conditional federal grant. Judge Vinson concluded that the federal courts had failed to develop any meaningful doctrine of coercion, and implicitly the federal spending power is unlimited with respect to conditional federal grants. This ruling was perhaps a blessing in disguise. He essentially called the Supreme Court’s bluff: Either affirm coercion in this case, or drop the pretense of a coercion doctrine.

Developing this theme in our brief, we argue that the practice of federal grants to the states conditioned on state compliance with federal policy preferences must have some limit, otherwise there is no way to protect state autonomy or the structure of our Constitution from federal coercion. We argue that if there is no limit in a doctrine of coercion, than it must follow that the whole practice of conditional federal grants is unconstitutional:

If from the Dole Court’s discussion of coercion one were to devise a hypothetical conditional federal grant program to make sure that some such program would qualify as coercive, one might hypothesize an enormous federal grant program, far-reaching conditions, the threatened loss of all funding for non-compliance, and, for good measure, an onerous change in the conditions of the already consented-to and established program, that would both increase the expense of the program to the States and further reduce their regulatory autonomy. In other words, one would hypothesize something like Medicaid and the Medicaid expansion provisions of the ACA. Though an issue of material fact arguably exists as to whether State consent remains a prerogative of the States “in theory and in fact,” it is virtually impossible to imagine what conditional federal grant program could possibly qualify as coercive if the one in the case at bar does not.

One conceptual problem for the Court is that, if the Medicaid expansion provisions of the ACA do not constitute coercion under Dole, then the judgment below must ultimately be vindicated: The spending power is not in fact limited by any coercion doctrine, or by any other protection for State sovereignty. But that would be the same as to hold that Dole itself was wrongly decided. This is because the discussion of coercion in Dole was no mere dictum. The Spending Clause cases of the Supreme Court have all recognized the danger of inducement rising to the level of compulsion, and vitally presupposed that the danger could be guarded against because Courts would be able to distinguish between encouragement and compulsion. […] If conditional federal grants have no limit in a doctrine of coercion, then the exercise of the power to make them has no limit, save such as may be self-imposed by the federal government. But that is precisely the unlimited spending power rejected by the Framers, and by virtually every major Spending Clause case of the Supreme Court since.

Oral argument is scheduled for June 8 in the U.S. Court of Appeals for the 11th Circuit.

-Mario Loyola