State-Local Government Relations: A Changing Pattern of Power, Funding, and Responsibility
Over the past decade, the landscape of state-local government relations in the United States has shifted significantly. One of the most noticeable trends is the substantial increase in state aid to local governments. While this growth in financial support has brought new opportunities, it has also highlighted persistent structural challenges in how authority, funding, and mandates are distributed across levels of government.
For most local governments—cities, counties, and townships—interactions with state governments revolve around three enduring issues: authority, funding, and state mandates. Each of these elements shapes the ability of local leaders to govern effectively and respond to the needs of their communities.
Authority: Local Control Remains Constrained
A longstanding tension in state-local relations is the limited authority many local governments have to govern independently. Despite growing responsibilities, counties and some cities still lack the power to restructure their operations, initiate new services, or pursue innovative financing mechanisms without approval from the state legislature.
The U.S. Advisory Commission on Intergovernmental Relations (ACIR), in its influential work Substate Regionalism and the Federal System, emphasized that the most critical intergovernmental relationships occur at the state and local levels. The federal government plays a supporting role, but it is the states that hold primary constitutional authority over local entities. ACIR argued that the federal government should merely adopt policies that support state and local initiatives, especially when it comes to reorganizing and modernizing government at the sub-state level.
The National Association of Counties (NACo) echoes this concern, stating in its American County Platform that counties need greater “flexibility of form, function, and finance.” Even in jurisdictions with broad home-rule powers, local governments often remain dependent on state legislatures for key decisions such as establishing new taxes, expanding services, or altering governance structures. This limited autonomy hampers innovation and responsiveness, particularly in fast-growing or economically diverse regions.
Funding: More Money, More Dependence
While state financial support to local governments has increased substantially in recent years, it comes with trade offs. Increased funding can mean increased oversight and tighter control from state capitals. State aid often flows through specific grants, earmarked programs, or formula-based distributions, which can limit how local governments use the money and require compliance with state-set priorities.
This dependency undermines fiscal autonomy and can constrain local strategic planning. For example, a city may receive significant funds for transportation infrastructure but have limited discretion to redirect those funds to pressing housing or public health needs. Moreover, as state budgets fluctuate, so does the stability of local funding, leaving local governments vulnerable to economic downturns or policy shifts at the state level.
State Mandates: Responsibilities Without Resources
Perhaps the most contentious issue in state-local relations is the imposition of state mandates requirements imposed by state law that local governments must follow, often without corresponding funding. These mandates can range from environmental regulations to public health reporting requirements, educational standards, or public safety protocols.
Unfunded mandates place a heavy burden on local governments, forcing them to stretch already thin budgets and divert resources from local priorities. While states argue that uniform standards are necessary to protect public welfare, local officials often view these mandates as top-down directives that disregard local circumstances and capacity.
Toward a More Balanced Partnership
Despite these ongoing challenges, the pattern of state-local government relations is not static. Many states are beginning to recognize the importance of empowering local governments to act more independently, particularly in the face of complex, regional problems like affordable housing, climate resilience, and economic equity. Some states have moved to expand home-rule powers, streamline grant processes, or establish more collaborative intergovernmental frameworks.
Still, progress remains uneven. As the ACIR suggested decades ago, a more productive federal role would be to support rather than supplant state and local innovation, and for states to extend greater flexibility to their local counterparts. True intergovernmental collaboration requires not only financial support but also a reevaluation of authority and accountability at every level of government.
