American federalism: what a ride: the changes in congress aren't apt to transform the relationship between the states and the federal government.

Let's think about the country's experience with federalism as a rollercoaster. A decade ago, relations between the state and federal governments had reached a thrilling apex. State legislators, governors and local officials had pressed Congress to approve the Unfunded Mandate Reform Act. Working closely with state leaders, the national government devolved responsibilities to states, giving them significant latitude to craft innovative solutions to welfare, health care, transportation and environmental problems. Freed from the burdens of unfunded mandates and a micromanaging federal government, state legislatures did what they do best. They tailored solutions to public policy challenges to the unique conditions and cultures of each state.

That heady experience at the top of the rollercoaster didn't last long, though. For the past few years, the descent has been steep, swift and scary. Unfunded mandates, epitomized by the No Child Left Behind Act, homeland security and the Individuals with Disabilities Education Act, have come back, and with a vengeance. Devolution has been superseded by preemption of state authority in almost every area of domestic policy, including driver's licenses, education and elections. And that wreckage you see on the ground below? That's what remains of the 1996 welfare law, whose revolutionary philosophy and approach were abrogated early in 2006 when Congress renewed the law for another six years.

A decade ago, when state officials were marveling at what they had accomplished and were enjoying the view from the top of the rollercoaster, control of the national government was divided. A former governor, Democrat Bill Clinton, was president and Congress was controlled by Republicans, whose now- famous Contract with America featured several state-friendly promises, including elimination of federal unfunded mandates. State legislators and governors capitalized on this alignment. They worked successfully with this divided government to produce a half dozen or more landmark laws that recognized the capacity, responsiveness and leadership of the states in the federal system.

George W. Bush, also a former governor, was elected president in 2000 and reelected in 2004. During the first six years of his tenure, President Bush governed with a Congress controlled by the GOP. It was during this period that the federalism headiness dissipated and the rollercoaster began its descent. Unfunded mandates returned--to the tune of $30 billion a year. No Child Left Behind, with its preemption of state authority over education policy, passed. So did the Help America Vote act, which established federal rules in an area that had always been in the states' jurisdiction. So did the REAL ID act, which sets federal requirements for state driver's licenses.

WHO'S TO BLAME?

It's hard to think about these two six-year periods and not be tempted to assign heroes and villains. First, we've got President Clinton and Speaker Newt Gingrich in their Carl Tubbesing is NCSL's deputy executive director. white hats advocating for devolution. If that's so, shouldn't we be dressing up President Bush and, say, Congressman Tom DeLay, in Texas-sized black Stetsons for their leadership during the second period? Isn't that the way federalism would be portrayed on a TV reality show? Surely, the explanations are more complicated and sophisticated than that. Perhaps the real hero is divided government at the national level.

Maybe the real nemesis of federalism isn't a person or a group of politicians or the political parties. There are more fundamental, longer-term influences at work that have much more to do with the world economy, technology and the Internet than with personalities and political leaders.

The changes that the 2006 elections brought Washington will give state officials a chance to test more nuanced explanations. The mid-term elections brought a return of divided government at the national level, this time with a Republican president and a Democratic Congress. The next two years may offer insights into some of the more fundamental forces shaping the current relations among the states and the national government.

When Congress begins its work this month, on its agenda will be four key issues that will offer clues to how states will fare in this new bipartisan environment.

A REAL PROBLEM

State legislators and governors are as "mad as hell and not going to take it anymore" about the REAL ID law. Members of some state legislatures--including New Mexico and New Hampshire--are so unhappy that they are considering not complying with the act's requirements. "It seems like the kind of situation where we ought to be planning some kind of tea party and dumping something in the Rio Grande," says New Mexico Representative Joe Cervantes.

Passed in early 2005 as a rider to an appropriations bill, the act sets national standards with which state driver's licenses must comply to be used as identification for boarding airplanes and entering federal buildings. Proponents of the legislation, including Wisconsin Congressman James Sensenbrenner, who chaired the House Judiciary committee for the past six years, view it as an essential tool in the fight against terrorism. REAL ID critics are wary of the costs the law will impose on the states--at least $11 billion according to a survey of state motor vehicle directors. They believe the law's deadline for compliance--May 2008 is unrealistic, if not impossible, to meet, especially given that the Department of Homeland Security does not expect to promulgate regulations until early in 2007.

Efforts are underway to effect changes to the law--at a minimum to extend the compliance deadline--and to convince Congress to appropriate the funds that will be necessary to implement it. As chairman of the Judiciary committee, Congressman Sensenbrenner was a skillful and passionate advocate for REAL ID. His move to the minority may remove an obstacle to amending the law. The new Democratic majority, though, may not want to go too far with this, for fear it could appear to be "soft on terrorism."

SIMPLIFYING SALES TAXES

Seven years ago, state legislators, governors, state revenue officials and representatives of the private sector embarked on a long-term project to streamline state and local sales tax systems. The goal of the project is to simplify sales taxes so that requiring out-of-state vendors to collect them would not burden interstate commerce. Twenty-one states have done this by adopting the streamlined interstate agreement and thousands of retailers are voluntarily collecting sales taxes on Internet and other remote sales. For three years, legislation has been pending in Congress that would convert this voluntary system to one legally sanctioned by the federal government.

Although the bill has had champions in both houses, it has encountered strong opposition, especially in the House and especially from Congressman Sensenbrenner, whose Judiciary committee has jurisdiction. The powerful Wisconsin congressman's move to the minority vastly improves the prospects for passage.

"The next few months will tell the tale, says Maryland Delegate Sheila Hixson, co-chair of NCSL's electronic commerce task force. "Getting the bill passed this year--before the 2008 campaign season gets into full swing--is absolutely critical."

IMPROVING NCLB 

The No Child Left Behind Act is scheduled for reauthorization in 2007. Among state legislators, there are vociferous critics and ardent supporters of this sweeping elementary education measure, which was enacted in late 2001. For some, such as New York Senator Stephen Saland, "it is the worst kind of federal over-reaching and under-funding." For others, such as New Jersey Assemblyman Craig Stanley, "it was unfortunately necessary in order to shine a light on the achievement gap that exists between low-performing and high-performing students." Working through NCSL, a bi-partisan task force of legislators and legislative staff produced in 2005 a comprehensive set of recommendations for improving No Child Left Behind. "We intend to use the report during this reauthorization year as a practical blueprint for changing the law so it will be more effective, workable and palatable to state legislatures," says Senator Saland, who co-chaired the task force.

Legislators hoping for significant changes, though, will face a formidable alliance between the administration and one of the Senate's more liberal and influential members. President Bush and Secretary of Education Margaret Spellings, are among the law's most committed advocates. They will be working with Massachusetts Senator Ted Kennedy, whose support secured tile measure's passage in 2001 and who will chair the Senate Health, Education, Labor and Pensions committee in the 110th Congress.

THE IMMIGRANT ISSUE

Congress and the president spent much of 2006 trying to reach an accommodation on immigration legislation. On one side were President Bush and a bi-partisan coalition of U.S. senators who wanted a comprehensive approach that would cover border security and law enforcement, as well as temporary workers and earned legalization.

On the other side were House Republicans who insisted on addressing only border security and law enforcement. In the end, the House prevailed. The question for 2007 will be whether the new political alignment improves the chances for more comprehensive legislation. The answer probably is "yes." Presumably, the president and the Senate will continue to advocate a comprehensive approach, and they will find more support in a House of Representatives now with a Democratic majority.

Although immigration issues are also controversial in state legislatures, a bi-partisan NCSL task force last year was able to adopt unanimously an official policy statement that roughly agrees with the comprehensive approach advanced by the Bush administration. "The task force felt that since state governments have responsibility for almost every aspect of the lives of immigrants--employment, health, law enforcement, education," says North Carolina Representative Joe Hackney, who co-chaired the task force, "we should use our work on the issue to be key players as the immigration debate continues in 2007."

Judging by these four critical issues, it would appear that the outlook for the states in tiffs new period of divided government is fairly promising. Maybe the federalism rollercoaster is pulling out of its steep descent. The longer-term concerns that state legislators have about their relations with the federal government are over unfunded mandates and preemption. The underlying causes for these concerns have not gone away with the 2006 elections. The federal deficit, which is the biggest reason that the federal government can't fully fund programs and, instead, passes costs along to the states, will continue for the foreseeable future. Besides, the Democrats made fiscal discipline one of the mantras they chanted throughout the 2006 campaigns. Even though they might be sympathetic to increased funding for state-federal programs, their commitment to reining in the deficit makes the prospects for curtailing unfunded mandates rather bleak.

PREEMPTION PRESSURES

The reasons the federal government preempts state authority are varied. Some of the pressures for preemption come from the private sector. Technological advances have blurred state borders, especially in the financial sector, so some, if not all, of the members of the banking and insurance industries argue for national regulation. Some in the business community view variations in state laws as an impediment to their competitiveness in the world economy and pressure for federal uniformity in a range of policy arenas. Pressures to preempt come from other points along the political spectrum. Social activists, for example, frequently prefer national solutions to human services, child welfare, education and health challenges, especially if they are able to attain a policy outcome at the federal level that they are unable to achieve in each of the 50 state legislatures.

Regardless of the source, these constitute fundamental and structural pressures on federal officials to preempt state authority. They didn't disappear on Nov. 7 and will continue no matter who is in power in Washington, D.C.

For Texas Senator Leticia Van de Putte, these long-term challenges to the states argue for "constant vigilance and engagement from state legislators throughout the country.

"State legislators," she says, "must be aggressive in their contacts with their federal counterparts and be creative in finding fresh approaches to federalism in this ever-changing environment." In other words, hang on. And, by the way, don't look down.

STATE-FEDERAL ISSUES TO WATCH

Here are 10 issues to keep an eye on during the 110th Congress, along with keys to their success or failure.

(1) REAL ID. The Department of Homeland Security has yet to issue regulations. How far will congressional Democrats be willing to go in fixing the law? And where can they find the $1 billion states need for start-up costs?

(2) Streamlined Sales Taxes. Supporters hope Congress will move quickly to pass federal legislation before the 2008 campaign season gets underway. Will a streamlined sales tax bill get wrapped up with other tax measures--and is that helpful or harmful?

(3) No Child Left Behind. Many believe a handful of changes would improve the law. Can state legislators engage in an effective grass roots campaign to persuade their congressional delegations to get behind the amendments?

(4) Immigration. More still needs to be done. Can President Bush and congressional Democrats find common, bi-partisan ground on comprehensive immigration legislation?

(5) Telecommunications. Major telecommunication legislation will carry over from 2006 with the potential for significant preemption of state and local control over video franchising and other telecommunications decisions. Will the new Congress choose to defer to the wave of telecommunications reforms currently underway in state capitols?

(6) Redoing the Unfunded Mandate Reform Act. State and local organizations have identified several changes that could be made to the law to make it more effective. Congressional Democrats have expressed concerns in recent years about unfunded mandates. How will they react to the proposed changes now that they have the majority?

(7) Reining in Preemption. California Congressman Henry Waxman became a major critic of federal preemption of state authority during his years in the minority. In the 110th Congress, he'll chair the House Government Reform Committee. Will he use that position to advance legislation developed by NCSL that would establish procedural safeguards against preemption?

(8) The Next Farm Bill. Congress is scheduled to reauthorize the Farm Bill in 2007. Recent international trade rulings could substantially alter the approach traditionally taken in farm legislation. NCSL has a new working group to guide the organization's farm bill efforts. How successful will it be in advocating for state interests in various agriculture and rural development programs?

(9) Children's Health. The highly regarded State Children's Health Program is also due for renewal in 2007. Will Congress be able to figure out a new distribution formula among states?

(10) Energy Independence. Last year's dramatic jump in fuel prices prompted interest in federal legislation to encourage biofuels, alternative fuels and other ways of lessening the country's dependence on traditional fuel sources. How much flexibility will states be able to maintain to continue their own energy and environmental innovations?