Do conditional grants really centralize power in the hands of the federal government as most federalism scholars claim? In federations such as Australia, Canada, and the United States, federal grants earmarked for specific purposes have been identified to be the main instruments used by federal governments to shape welfare policies run by the provinces and states. There is a strong consensus in the literature on fiscal and dynamic federalism that the use of conditional grants thus leads to centralization since the constituent units supposedly lose autonomy. This paper scrutinizes the centralizing effect of conditional grants by examining the genesis of health care programs funded through earmarked grants in Australia, Canada, and the United States. To do so, it establishes whether such programs are initiated by the federal government or requested by constituent units and determines the degree to which the conditions attached to federal funding are imposed or negotiated. This includes a closer look at intergovernmental negotiations and the institutional arenas that channel such negotiations, should they take place, as well as package deals and opting-out provisions to identify the actual say the constituent units might have when negotiating the conditions attached to federal grants. Whether they are confronted with take-it-or-leave-it offers – that provinces and states often cannot refuse because they need the money – tells us about the extent to which federal governments can make use of their spending power to limit constituent units’ autonomy. Based on these findings, a composite indicator measuring the extent to which constituent units lose autonomy in the genesis of conditional grant programs is developed. By investigating the centralizing effect of conditional grants, the paper contributes to a rising research agenda, namely the study of the dynamics of federalism that conceptualizes centralization and decentralization in terms of autonomy.

About the presenter:

Johanna Schnabel is a British Academy Newton International Fellow at the University of Kent. Her postdoc project investigates whether the use of conditional grants in funding welfare policies in federal states really leads to centralization. Dr Schanbel holds a PhD from the University of Lausanne (Switzerland). Her PhD thesis examined whether intergovernmental councils in Australia, Canada, Germany, and Switzerland enhance these federations’ stability. Moreover, Dr Schnabel contributed to a collaborative research project on fiscal consolidation in federal states. The results of this project have been published by Routledge in 2017.