Our View on Modernizing Federalism and Government


American Federalism—our federal and state partnership—paved the way for many successes. Initially, each partner’s respective roles seemed clear, with the federal government tackling international challenges like war and trade and states confronting domestic issues like education and health. Even as the federal government grew in size and scope, states emerged as “labs of democracy,” offering innovative alternatives to federal one-size-fit-all strategies (at least in theory).

But, as the world grew smaller and our problems more sprawling and intractable, Federalism has struggled. In the face of recent events, Federalism appears ill-suited for fighting global pandemics, maintaining economic stability and ensuring fairness and justice. The time has come to reassess Federalism. If we truly want reform—in public health, criminal justice or economic equity or elections—we must reinvent Federalism to meet modern challenges.

The Evolution of Federalism

American Federalism is a political system characterized by the partnership between two sovereigns—the federal government and states. In Federalist No. 39, James Madison called the US Constitution “a national [and] federal Constitution,” a blend of a unifying national entity and a state confederation. In Federalist No. 46, Madison described the national government and states as “different agents … with different powers.”

The Constitution does not explicitly define Federalism, but it does outline the respective powers and duties of federal and state government. It assigns the federal government expressed powers such as levying taxes, declaring war and regulating interstate and foreign commerce. Under the Necessary and Proper Clause, it also grants the federal government those powers implied to execute its expressed powers. To the states, it conveys sovereignty and reserved powers (i.e., powers neither expressed nor implied).

The 1787 constitutional convention tackled many controversial issues, including state borders. Some delegates proposed redrawing state boundaries to equalize population (Southern states had smaller populations). The South blocked that idea (and any other measure that jeopardized slavery). Instead, after threatening to abandon the proceedings, the South won adoption of the infamous Three Fifths Clause (every slave was counted as three-fifths of a person for representation purposes).

Until the Civic War, the states were dominant partners (despite Andrew Jackson’s presidency and the Supreme Court’s 1819 McCulloch v. Maryland decision) and local governments began to flourish (praised by de Tocqueville for their responsiveness and accountability). As the nation grew, however, the federal government steadily accumulated more power. After the Civil War, the national government navigated two wars, a new income tax, trust busting and social reforms. After the Great Depression, the federal government became a general partner, creating jobs, fighting wars, building interstate infrastructure, creating global institutions and leading the free world—easily eclipsing the states in power and influence.

During the last five decades, Federalism has been rebranded, shifting power from the federal government to state and local governments. In the 1970s, general revenue sharing increased unrestricted federal aid to states and localities. Since the 1980s, states have been assigned lead responsibility for managing most major domestic programs (e.g., Medicaid, family assistance and education). And the Supreme Court has chipped away at federal powers, including the Commerce Clause. Still, such tweaks have left in place Federalism and its anachronisms (e.g., the Electoral College).

The Great Recession severely tested Federalism and the federal-state partnership. After years of delegating more power to states, the federal government discovered that many states—hamstrung by constitutional budget limits, structural fiscal weaknesses and weak executive branches—lacked sufficient capacity to be effective partners. The federal government, with its ability to print money and accumulate debt, assumed greater responsibility for domestic programs. State governments increased their reliance on federal funds, especially for Medicaid.

The Failure of Federalism

As the Great Recession revealed, Federalism is only as strong as the weakest states. For the federal-state partnership to work well, all states (and their local partners) must possess adequate capacity to pull their weight. Instead, Federalism and our insatiable appetite for new local governments have bequeathed us a mystifying tangle of federal agencies, state governments, the District of Columbia (DC) and thousands of local governments.

Over time, the number of states grew from the original 13 to 50 (plus DC, a state without sovereignty or representation). Before the Civic War, every new state was debated in the context of slavery. Current state borders, set when our nation was much smaller and metro regions simply didn’t exist, are largely the curious result of geographic markers (like rivers), latitudinal and longitudinal lines, political compromises and surveying errors. If they reflect population centers, it is merely coincidental.

States perform the same basic functions and their differences in geography, demographics, density, health, education and wealth don’t threaten Federalism. But, their divergence in capacity does. In FY17, for example, per capita state and local government expenditures, a proxy indicator of government capacity, ranged from a low of $6,766 (Idaho) to highs of $14,434 (New York), $15,339 (Wyoming) and $17,200 (Alaska). The capacity of states to respond to crises like the pandemic is also affected by bureaucratic and ideological factors.

The 90,000 local governments vary even more dramatically in form, capacity and services (when they don’t overlap). The number of local governments per 100,000 residents varies dramatically by state (e.g., from 1.5 in Hawaii to 352.8 in North Dakota). Most metro areas include an array of distinct local governmental forms, including cities, counties, towns, school districts and special districts. In some areas, like Pittsburgh and St. Louis, one county may include a hundred or more local entities. Most local governments are small (e.g., 84 percent of incorporated units serve less than 10,000 residents). Some local services vary so much that one’s ability to survive a heart attack or fire can be a function of address (or luck).

Federalism also exacerbates intergovernmental tensions. The feds and states spar over laws and regulations. Ten states receive less federal funding than their residents pay in federal taxes. In lieu of federal coordination, fierce inter-state economic competition yields too many dubious private subsidies (e.g., Amazon HQ2). Many state legislatures annul local laws. And local rigidity impedes regional coordination (e.g., Stockton, a bedroom community of low-wage Bay Area workers, receives no tax revenues from its wealthy neighbors).

The Covid-19 pandemic has revealed Federalism’s flaws even more starkly. First, it has revealed the devastating impacts of public policies developed under the cover of Federalism. Rising economic inequity not only among classes, but communities. Undervalued, overworked human capital. Exclusionary zoning, segregated housing and insulated neighborhoods. Environmental racism. Fragmented public health programs. Inefficient health care. Unequal schools. Frayed infrastructure. Rationed broadband.

Second, the pandemic has exhibited our government’s inability to mount an effective response to fast-paced global crises. The President’s incoherence has forced state and local governments to fight the pandemic on their own. This has exposed wide variances in state and local capacities, the inherent weakness of balkanization and the tragic consequences of weak coordination. Our uneven response has wreaked unprecedented social and economic havoc, especially among marginalized communities.

Third, the pandemic has highlighted the senselessness of most jurisdictional borders. Borders demarking states, counties, municipalities and towns have hamstrung our fight against a virus that respects no border. And, even in states with effective leadership, it has been tough to coordinate actions for multi-state metro regions. Too many regions straddle state lines (e.g., Boston, Charlotte, Cincinnati, DC, New York City, Philadelphia and St. Louis) and comprise scores of independent (if not competing) local governments. Too many counties, formed for parochial (if not racial) reasons, lack the capacity to manage in good times, let alone bad.

The Federalism model has many flaws. Siloed public agencies. Excessive specialization. Conflicting communications. Debilitating competition. Misallocated and misused resources. Service gaps and duplication. Rampant inefficiencies. Diffused accountability. As Covid-19 stalks us and future crises loom, it is clear that our current governmental model requires wholesale change.

The Rising Importance of Regions

Our founders did not anticipate regions when they crafted Federalism. Our nation was far more rural and our cities much smaller. Not surprisingly, our governmental model evolved almost entirely without regard to the growth of metro regions. Our state and local governmental structures remain estranged from metro regions even as they have emerged as the building blocks of the 21st Century global economy.

What are regions? For organizing population data, the US Census Bureau uses five types of regions, including Combined Statistical Areas (CSAs) and Metropolitan Statistical Areas (MSAs). There are 175 CSAs (172 in the US) and 392 MSAs (384 in the US). The largest CSAs are New York, LA, Chicago, DC-Baltimore and the Bay Area. The largest MSAs are New York, LA, Chicago, Dallas and Houston. Other MSAs include Portland, San Diego, Salt Lake, Oklahoma City, Kansas City, Cleveland, Providence, Raleigh and Tampa.

Some experts view megaregions (combined metro areas) as the global economy’s hubs of capital, goods, talent and innovation. The Regional Plan Association recognizes 11 megaregions in the US, Canada and Mexico. The two largest megaregions are the Great Lakes Megalopolis (e.g., Minneapolis, Kansas City, Chicago, Detroit, Cincinnati, Cleveland and Toronto) and Northeast Megalopolis (e.g., BostonNew York, Philadelphia, DC and Richmond).

Why are regions important? First, regions—unlike states and counties—are organized around people, where they live and work. Second, regions are the smallest unit at which we can solve our toughest challenges—economic, education, health, energy, climate and infrastructure—and still hold government accountable. Third, few civic ills can be cured without regional teamwork. Finally, regions provide the most efficient platform for allocating public resources and reforming public institutions.

North Carolina, one of the nation’s first 13 states and now its 10th largest, exemplifies the importance of regions. It has grown from an agricultural state of small, isolated towns to a dynamic group of economic regions like Charlotte and the Research Triangle and MSAs like Asheville, Winston-Salem and Wilmington. Today, the state may be better known globally for its regions than its state government. And more people than ever work or play in North Carolina, but live in adjoining states and cities (e.g., Virginia Beach and Rock Hill SC).

Despite the growing importance of regions, the US (and most states) lacks a coherent regional collaboration strategy. In fact, the Advisory Commission on Intergovernmental Relations (ACIR), the federal forum for resolving intergovernmental conflicts, was terminated in 1996. There are many reasons for this neglect. Metro areas lack a political constituency. Parochial interests are easier to exploit than regional. The very concept of regionalism is hard to define and grasp. And erecting walls is more enticing than building bridges.

To its credit, the federal government has recognized the importance of regional transportation planning. In 1962, it created metropolitan planning organizations (MPOs) to help allocate federal transportation funds in regions. In 1991, the Intermodal Surface Transportation Efficiency Act (ISTEA) expanded MPO roles and funding. Today, there are over 400 MPOs in the US, with substantial diverge in authority, structure, capacity and clout. Nearly all MPOs comprise appointed members (Portland’s MPO is one exception).

A Governance Model for the 21st Century

To achieve any meaningful reforms in economic opportunity, criminal justice, public health, climate change and democracy—that is, to begin forging a new America—we must first build a new public service model. That model must be built from the ground up around people, not outdated borders.

Our new public service model should build on the strengths of Federalism (e.g., shared sovereignty and delineated powers), but correct its flaws. Much like a smart grid, the new governance model should be an integrated, resilient and sustainable network. It should feature two-way communications, extensive resource sharing, distributed functionality, cross-training and expanded partnerships (e.g., businesses, nonprofits and universities). It’s implementation should commence with two steps.

The first step should be to formalize regional governance structures around people. A de novo approach would require objective criteria for defining regions (e.g., geography, location, distance, population, media, economic activity, justice, public health, infrastructure and service delivery). A more pragmatic approach would be to use existing regional models to establish regional maps (e.g., MSAs, MPOs or CSAs). Then, using those maps, we should consolidate the nation’s 3,200 counties, parishes and boroughs into 400 to 500 regional districts that will perform regional planning and service delivery functions for municipal governments.

The second step should be to reorganize the states around regions. This won’t be easy, but it can be done. First, Congress should enact a national advisory commission to develop a plan to consolidate the 50 legacy states and DC around into 15 to 25 new states. Second, the plan should be legally sanctioned. Under Article IV, Section 3 of the Constitution, this plan would require the consent of Congress and all 50 state legislatures. Alternatively, a Constitutional amendment should be considered to facilitate the plan’s implementation.

Other recommended strategies for implementing the new governance model should include the following:

  • Reorganize local governments – Reorganize existing local governments within regions, e.g.:
  • Reorganize the municipalities and distinguish regional and municipal functions
  • Create sub-districts for delivering desired services to rural and unincorporated areas
  • Liquidate special districts and transfer their functions to regional districts
  • Foster the creation of regional planning, economic development and revenue-sharing mechanisms
  • Empower MPOs – Designate MPOs as the nation’s primary mechanisms for coordinating regional planning and federally-funding initiatives, augment MPO funding and standardize MPO structures (e.g., embed MPOs within the new regional governance model)
  • Decentralize federal domestic powers – Delegate more powers to the new states, including more flexibility and resources to serve as true laboratories of democracy (e.g., control over Medicaid)
  • Promote intergovernmental cooperation – Establish a newadvisory commission to as a national mechanism for fostering regional cooperation, promoting multi-state compacts, resolving intergovernmental conflicts and recommending strategies for solving regional issues
  • Launch regional initiatives – plan, fund and implement several high-profile regional reform initiatives to demonstrate the efficacy of the new regional district model
  • Fund regionalism – Provide sufficient federal funding to incentivize local governments to implement the new model and accelerate joint regional initiatives (e.g., matching funds for inter-state compacts)
  • Marshall assets – Assess public assets, consolidate and reform legacy obligations (e.g., pension funds) and leverage such resources for future investments
  • Bolster fiscal reserves – Strengthen state and regional reserve funds with a federal matching program

Government should emulate one feature of successful businesses. Businesses that prosper continually adjust their structures to better serve their markets. Instead of forcing governments to work around antiquated structures, we should design a flexible governance model that serves constituents more efficiently and enables us to respond to future crises more quickly and recover from economic downturns more rigorously.


We can no longer ignore the fact that our Federalism model—and our fragmented governmental structure—has not kept pace with the scope and speed of global change—economic, technological and cultural.

It is of little interest to most Americans, but government fragmentation impedes our ability to preserve health and attain meaningful reform. Every big issue—elections, public health, criminal justice, equity, education—demands bold, transformational ideas. But the inadequacies of Federalism loom large, saddling us with 10,000 election boards, 18,000 law enforcement agencies, 3,000 public health entities and 13,500 public school districts. Top down reforms will help, but enduring, systemic and cultural changes must occur locally. Without a new governance model, such changes face enormous odds.

Our eyes should be open. The barriers to a modern governance model are daunting. Inertia is a powerful force. Political resistance will be bitter. Hard-won turf will be defended. Litigation will be rampant. Consensus will be elusive. Implementation costs will be high.

Still, the benefits of modernizing our governance model will far exceed the costs. More effective public health programs. Fairer criminal justice. More resilient economic and fiscal structures. More flexible and responsive public agencies. Lower per capita government costs. Rigorous accountability. Revitalized democracy. And the pandemic and the looming fiscal collapse of state and local governments lend urgency to this moment. A truly exceptional American government is within our grasp!

The author, Bob Melville, is the founder of Civic Way, a nonprofit dedicated to good government, and a management consultant with over 45 years of experience working with governmental agencies across the US.