Counterdevolution

For four years in a row, the Indiana legislature has tackled the emotionally charged issue of drunk driving, haggling over whether to reduce the legal blood alcohol limit from 0.10 to 0.08 per cent. So far, opponents of the change have prevailed. But state officials may have debated the issue for the last time. That's because Congress may decide it for them.

Last month, the Senate voted to withhold transportation funding from states that fail to lower their blood alcohol limits to 0.08 per cent. House members have thus far resisted the lower limit, but sponsors vow to push for it in House-Senate negotiations. Even for the Indiana officials who support tough new drunk-driving rules, the Senate vote came as a shock.

"You wonder, then, why did the legislature bother to debate it four years in a row?" said Paul Helmke, the mayor of Fort Wayne, Ind., and president of the U.S. Conference of Mayors. "The problem is that when we decide these things at a national level, we're adopting a one-size-fits-all approach that might not make sense everyplace."

Helmke's argument should ring a bell with Republicans on Capitol Hill. Not too long ago, they were singing a very similar tune. Remember devolution? That was the Republicans' battle cry when they seized control of Congress four years ago. The GOP majority's "New Federalism"--handed down from President Reagan and from President Nixon before him--was supposed to banish bureaucracy and waste by devolving power back to the states.

Republicans would deliver "a smaller government financed by lower taxes that engages the American people with greater respect and greater freedom to conduct their own affairs," declared House Majority Leader Richard K. Armey, R-Texas, at the time of the GOP takeover.

That was the theory, at least. In practice, the devolution revolution has largely fizzled. Except for passing welfare reform in 1996 and a bill a year earlier that banned "unfunded" federal mandates on the states, congressional Republicans have given up little federal power. This year, in fact, they're poised to usurp state authority on several fronts, from juvenile crime to electric utility deregulation to property rights.

"It's very disappointing to hear a lot of high-flown talk about devolution and then not see the reality," said Lucy Allen, the mayor of Louisburg, N.C. She's one of dozens of mayors, state legislators and governors alarmed by Congress's growing penchant for preempting their power.

The "counterdevolution" trend, as local officials call it, has particularly stung GOP governors, who also swept to a majority in 1994. Two years ago, they stood shoulder to shoulder with Republicans in Congress to usher through welfare reform. Now, the alliance between Republican leaders and their counterparts outside the Beltway is crumbling.

"The [federal] mandate has given way to the preemption," said Gov. Mike Leavitt, R-Utah. "Both have the effect of stifling local government and state government. And I honestly believe that that is contrary to the wishes of the people."

If national Democrats once burdened the states with rigid social-welfare directives, governors complain, the Republicans now want to be the nation's zoning and tax commissioner. They're telling states what they can't do--restrict local development, for example, or tax the booming Internet industry.

To some degree, Republicans at the federal level just can't resist doing things their way. As James Madison observed, the natural tendency of government is "to throw all power into the legislative vortex." After all, said Washington lawyer and devolution expert Charles J. Cooper, "federalism is a principle of convenience."

Congressional Republicans, moreover, owe divided allegiances. Their cozy relationship with big business increasingly trumps their romance with devolution. Corporate interests would rather follow one set of federal rules, not multiple state and local guidelines--making them the natural enemies of federalism. And they've got the big campaign dollars that GOP leaders crave. Most of the bills in Congress that are causing an uproar in city halls today are pro-business measures.

Observed Carl Tubbesing, deputy executive director in Washington for the Denver-based National Conference of State Legislatures: "A proposal like telecommunications reform [or] like electricity deregulation, whether the sponsor intended it or not, attracts all sorts of campaign money."

Mixed Messages

Federalism still has its cheerleaders, of course. The Republican-sponsored 1996 law replacing the social welfare bureaucracy with block grants to the states has been a huge success, said Richard P. Nathan, director of the Rockefeller Institute of Government at the State University of New York (Albany). "I've never seen a period of so much state and local innovation and activism."

And some GOP members of Congress are still fighting the good fight. Rep. Thomas J. Bliley Jr., R-Va., for one, has proposed letting states introduce amendments to the Constitution. Bliley's measure would significantly shift the constitutional balance of power toward the states, its proponents argue.

Sens. Fred D. Thompson, R-Tenn., and Carl Levin, D-Mich., are backing a regulatory reform bill that would make it easier for state and local officials to influence the federal rule-making process. Thompson called the bill "the next step" to toughen the 1995 unfunded mandates law, which, according to a recent General Accounting Office report, has had little effect on how agencies write their regulations.

Governors welcome Thompson's effort; plenty of Clinton Administration proposals have made their hackles rise. (One example is the Administration's plan to push organ-transplant centers to share donated organs nationally, rather than regionally.) But Thompson's bill would do nothing to rein in what many city officials see as the real source of their headaches: Congress. Even Thompson acknowledged that congressional Republicans' record on states' rights has been "a very mixed bag."

"It's much easier to devolve when somebody else is in power," said Thompson, a staunch states' rights advocate. "When you've got the ball, the temptation is to replace those bad, old regulations with your good, new regulations, instead of sending it back to the states."

This has been a banner year, in fact, for congressional proposals that rankle state and local officials. Among those moving through the House and Senate are:

• A juvenile crime bill that offers states millions in federal grant money, but only if they agree to prosecute serious youth offenders as adults. Other mandates involve increased record-keeping, more drug testing and minimum jail times for juveniles. The National District Attorneys Association opposes the bill, as do state law enforcement officials represented by the National Criminal Justice Association.
• A bill that would bar state and local governments from taxing any form of Internet commerce for the next three to six years. Many governors and municipal officials warn that the moratorium would cost them millions of dollars in sales tax revenues. Gov. Leavitt calls the Internet tax fight "the most important federalism issue that we've had in decades."
• Private-property rights legislation that would allow landowners to bypass state courts and go directly to federal court when they disagree with local zoning decisions. The bill is "an attack on the fundamental rights of local governments when it comes to zoning and local land use issues," said Reginald N. Todd, legislative affairs director of the National Association of Counties (NACo).
• A bill that would deregulate the electric utility industry, requiring states to restructure electricity services by the end of 2000. The bill has "tremendous potential tax consequences," said William D. Steinmeier, national chairman of the Jefferson City (Mo.)-based Electric Utility Shareholders Alliance. Many communities rely on property taxes from electric utilities for the bulk of their revenue, Steinmeier pointed out, but that money will be in jeopardy if utilities go out of business because of competition.

Local government officials are still smarting over the 1996 Telecommunications Act, which gave broadcasters and telephone companies wide latitude in deciding where to put up mammoth digital television and cellular phone towers, regardless of whether citizens agreed. Vermont Sens. Patrick J. Leahy, a Democrat, and James M. Jeffords, a Republican, have introduced a bill that would make it easier for citizens to have the final say over tower sitings. Leahy voted against the 1996 law, he said, "because it wiped out all local control."

Add to that Congress's first act this year: a bill to rename Washington National Airport after former President Reagan. State and local officials strenuously objected, citing cost and potential confusion to tourists. The irony of the name change, said Rep. Jim Moran, D-Va., whose district includes the airport, was that Reagan signed into law the bill that transferred control of the airport from the federal government to the Metropolitan Washington Airports Authority. Reagan "never would have wanted this, I'm sure," Moran said. "It's wholly contrary to his philosophy."

David v. Goliath

State and local government groups, galvanized by what they say is an unprecedented federal power grab, are fighting back. Last month, the National League of Cities declared that "preserving municipal authority" is its highest federal priority for 1998.

"It's a tough time for local governments," said Brian J. O'Neill, a Philadelphia councilman and president of the league. "We're not being brought into the loop. We're not being asked: How would this affect you? Industry writes the bill, industry pressures the Congress and Congress produces the bill. It's a big change from what we've seen for the past couple of hundred years."

The league and other like-minded organizations--including the mayors' conference, the State Legislatures' Conference, NACo and the National Governors' Association--are working together more closely than ever. They're also spending a lot more time in Washington these days.

Federal preemption "is going to be a principal focus of our organizations over the next several years," said NACo's Todd. "If you don't have authority to run your governments, then what else do you really have?"

But local officials are vastly outgunned when it comes to battles over land use, zoning and taxes. Take the pending Property Rights Implementation Act, known as the "takings" bill because it aims to enforce the constitutional ban on the government's taking of private property without just compensation.

The nation's developers, led by the National Association of Home Builders, have waged an aggressive lobbying campaign for the bill, which has passed the House and awaits Senate action. The Home Builders' political action committee gave $594,250 in campaign contributions last year alone. It also doled out $90,000 in "soft money" to the political parties. Developers argue that property owners who disagree with local zoning decisions now languish in state court for years without recourse and should be allowed to go straight to federal court.

Municipal officials, however, say that citizens know best whether a mega-mall belongs in a residential neighborhood, or an adult movie house near a school. Zoning disputes, in fact, go to the heart of what local governance is all about, municipal officials say. They argue that developers who win the power to sue in federal court may be ill-inclined to negotiate with local citizens.

"Faced with the prospect of a costly and time-consuming federal court lawsuit, local officials inevitably would feel pressure to approve land use proposals to avoid litigation, even if the proposed use might harm neighboring property owners and the community at large," warned the Justice Department in a February memo to Leahy, who opposes the bill.

City officials in Hudson, Ohio, know about costly lawsuits with developers. They've spent close to $400,000 since July 1996 on a legal battle with developers who objected to a city growth-management ordinance, enacted in May of that year. The suit, spearheaded by the Home Builders Association of Greater Akron, eventually ended in Hudson's favor. But it cost the city time and money that would have been better spent on traffic, road and sewer improvements, said city manager James C. Smith.

The takings bill is unlikely to become law. Leahy, who says the measure "would have just totally trampled any local control," has threatened a filibuster, and the White House has promised a veto.

More likely to win approval this year is the Internet Tax Freedom Act, introduced by Rep. C. Christopher Cox, R-Calif., and Sen. Ron Wyden, D-Ore. The legislation pits state and local officials against an even more formidable foe than the nation's developers: the telecommunications industry.

Despite some key differences, both the Cox and Wyden bills aim to shield the Internet from burdensome new state and local taxes. They would place a moratorium on new Internet taxes until tax rules can be updated to fit the new technology. President Clinton, long a friend of Silicon Valley, has endorsed the legislation.

Though some governors--those from states with booming communications sectors--support the bill, most have reacted with panic. State and local governments depend on sales taxes and excise taxes for up to 50 per cent of their revenue. A tax-free Internet will attract more and more product sales, governors fear, gutting their tax base. Some see nothing less than the future of local government at stake.

"We're defining right now, I believe, the shape of government in the future," said Leavitt, who has helped spearhead the fight against the bill and warns that a general, national sales tax may be in the offing.

Who collects taxes is a key question that defines the state-federal relationship, foes of the moratorium agree. "It's always kind of a slippery slope," said Sen. Byron L. Dorgan, D-N.D., a bill opponent. "I worry that if we do something that dramatically reduces the state and local tax base, it's going to have long-term ramifications for how we construct tax revenue systems at both the state and federal level."

A complication for governors is that catalogue merchants--unless they have a physical presence in the states where they sell products--are not now subject to sales taxes. Governors are working with Cox on a compromise that would revamp catalogue and Internet sales-tax rules in one fell swoop. But the measure's future is uncertain, and Wyden is resistant.

Wyden's got plenty of powerful allies. The Internet tax bill is backed by a heavy-hitting coalition that includes America Online, International Business Machines Corp., MCI Communications Corp. and Microsoft Corp. Altogether, communications and electronics interests gave out a whopping $24 million in contributions to candidates and political parties in the 1996 election cycle, according to the Center for Responsive Politics, a Washington nonprofit group.

"I sometimes feel like we're a fifth-grade football team taking on NFL teams," said Frank H. Shafroth, director of policy and federal relations at the National League of Cities.

Free Markets or Federalism?

Shafroth and other champions of state and local authority, however, acknowledge that larger economic forces--not just campaign contributions--are driving the anti-federalist movement.

A high-technology global economy demands uniform standards, and is not sensitive to state and local boundaries. And international trade treaties invariably preempt state environmental and health rules. "The American economy is changing very, very fast," Shafroth said. "And money and goods can now move around the world. It makes the concept of borders, whether it's between cities, between states or between countries, harder and harder to find."

Defending federalism, moreover, is tricky business. While the Constitution's 10th Amendment protects states' right to self-governance, the commerce clause gives the national government authority to wipe out state-imposed trade barriers. Many business-related policy issues, such as electricity deregulation, arguably relate to interstate commerce. The Constitution also protects property rights, as advocates of the takings bill like to point out.

"Republicans, in principle, certainly libertarian Republicans, don't stand any more for local tyranny than we do for federal tyranny," said Roger Pilon, director of the libertarian Cato Institute's Center for Constitutional Studies. "We're against tyranny, wherever it comes from."

Still, Pilon deplores what he called congressional Republicans' "rank hypocrisy" in areas like the gun-free schools law. GOP leaders "are responding to the maelstrom of political pressures, without any constitutional compass to guide them through the thicket," Pilon complained.

Even when members of Congress see a constitutional reason to meddle in state affairs, some federalism experts argue, they should proceed with caution. "It's very hard to say that Congress doesn't have the raw power, and it's legitimate that that power be exercised" in areas such as interstate commerce, said Cooper, a partner with the Washington law firm of Cooper, Carvin & Rosenthal. "At the same time, a Congress genuinely devoted to respecting the rights of the states would exercise that power very carefully, and very grudgingly."

Mayors, state legislators and governors, in fact, may have more sway on Capitol Hill than they realize. They represent local constituents with the power to vote members of Congress in and out of office.

When 3,000 mayors and city officials descended on Washington for the National League of Cities' legislative conference last month, a delegation of them dropped in on Senate Majority Leader Trent Lott, R-Miss. Before the league members went home, Lott made them a public promise on the Internet tax bill: "We will not have any action in the Senate until we have worked out an agreement that you are comfortable with and you think is right for your people."

House leaders, too, are beginning to voice concerns about slapping new drunk-driving rules on states. They may beat back the Senate's lower blood alcohol limit in the upcoming House-Senate conference to finalize this year's transportation spending bill.

That should come as a relief to Wisconsin GOP Gov. Tommy G. Thompson, who called the Senate's use of transportation dollars to dictate state drunk-driving policy "a bad, bad precedent." Fortunately for Thompson, the fight over drunk-driving laws is one that, for once, places governors on the same side as an influential business lobby: the alcoholic beverage industry.

Increasingly, however, GOP members of Congress face a choice between satisfying their friends in big business and pleasing their friends in the statehouses. It may be impossible for them to consistently do both.