Nebraska legislators are considering a host of reforms this session that strengthen federalism and create more accountability and transparency around the use of federal funds.
As part of the Platte Institute’s “GOAT” package, The Federal Funds Inventory represents a powerful tool for transparency and legislative oversight that addresses a growing concern: states committing to federal mandates without input from elected officials entirely. At the invitation of the Platte Institute, SPN’s Center for Practical Federalism Fellow Steve Johnson testified on the merits of a Federal Funds Inventory based on his expertise and experience as a legislator in Michigan.
The Problem: Hidden Federal Influence
Currently, state agencies routinely accept federal grants with strings attached, often without legislators knowing the full scope of what their state has agreed to follow. When federal agency staff call state agency heads offering funding with new requirements, these officials are often quick to accept both the money and the mandates without legislative input.
“The biggest issue we’re seeing with federal coercion of state governments is that it’s bureaucrat to bureaucrat,” explains Steve. “If you get a call from DC saying you get this money, but you have to have these requirements, they take the path of least resistance.”
This dynamic allows federal agencies to impose rules that often go beyond what federal law actually requires, creating de facto policy.
Nebraska’s Three-Pronged Solution
The Federal Funds Inventory addresses this problem through three key mechanisms:
Transparency First: The legislation requires annual reporting of federal funds received by state agencies, including what percentage of each agency’s budget consists of federal money, any maintenance of effort requirements attached to that funding, and the specific strings that come with each grant.
Legislative Approval: Perhaps most significantly, the bill prohibits state agencies from entering agreements that require maintenance of effort—whether financial commitments or regulatory changes—without legislative approval. This means agencies can’t commit the state to spending more money or adopting new regulations without elected officials weighing in.
Contingency Planning: Agencies must develop concrete plans for what they would do if federal funding were reduced by 10 percent or more, forcing honest conversations about how dependent the state is on federal funds and possible alternatives.
Empowering Elected Officials
The strength of this approach lies in putting elected officials—who must answer to constituents—back in the driver’s seat. When legislators must approve agreements with federal strings, they can evaluate whether those requirements align with their state’s priorities and values.
Nebraska’s effort, championed by the Platte Institute, demonstrates how states can reclaim authority over their own governance. The legislation has attracted bipartisan interest because having a contingency plan empowers states to make the best decisions about their finances rather than at the mercy of the federal government’s whims.
As Steve noted, “When you don’t have a plan, the federal government can coerce you to do what they want because you’re terrified of losing a single dollar. If instead you can say ‘we’re prepared,’ you’re not as worried when they put strings on these funds.”
You can watch Steve’s full testimony in the Nebraska legislature here. This approach offers states a path toward true self-governance—not by rejecting federal partnerships, but by ensuring those partnerships serve state priorities.