Federalism and Who Holds Power in America

What Is Federalism

Most federalism fights are about one question: who gets to decide. The answer is rarely all one level. A state writes its own school standards but spends federal money that comes with civil rights rules. A state runs its own elections, but Congress can set rules for federal races. The sections below show where the lines sit and how Washington moves them.

Enumerated, Reserved and Shared Powers

The Constitution gives Washington a list and leaves states everything else. The list sits mostly in Article I, Section 8: taxing and spending, borrowing, regulating commerce “among the several States,” coining money, running a post office, raising armies and declaring war. These are the enumerated powers.

Everything not on that list belongs to the states or the people, which the 10th Amendment says outright. These reserved powers are what lawyers call the police power, the general authority to pass laws for health, safety and welfare. It is why states, not Washington, write most criminal law, license doctors and teachers, and run schools.

Some powers belong to both. Both levels tax, borrow, build courts and enforce laws inside the same borders. When the two collide, the Supremacy Clause in Article VI decides: a valid federal law beats a conflicting state law. Our preemption explainer covers how that plays out, including states overriding their own cities.

Dual and Cooperative Federalism

Scholars describe two models of how the levels share work, and the country moved from one to the other in the 1930s. In the first, each level runs its own programs in its own lane. In the second, Washington writes the rules and pays much of the bill, and states run the programs. Political scientist Morton Grodzins compared the two to a layer cake and a marble cake.

	Dual federalism (layer cake)	Cooperative federalism (marble cake)
How work is split	Each level runs its own programs in separate lanes	Washington sets rules and pays, and states run the programs
When it dominated	From the founding until the New Deal	From the New Deal in the 1930s to today
How money moves	Little federal money reaches states	Grants carry federal conditions, from Medicaid to highways
Example today	State criminal law and licensing	Medicaid, which states run with federal money and federal rules

Source for the layer cake and marble cake terms: Morton Grodzins, The American System (1966).

The marble cake is the one you live in. Medicaid, highways, school lunches, unemployment insurance and disaster aid all run on federal dollars spent by state agencies. That is why the biggest federalism fights now are over money and the conditions attached to it.

Commerce and Spending, Washington’s Two Levers

Two clauses let Washington reach far into what states once controlled: the power to regulate interstate commerce and the power to spend. The Supreme Court has stretched and trimmed both, and the key rulings run from 1819 to 2012. McCulloch v. Maryland upheld a national bank in 1819. The New Deal Court expanded the commerce power in 1937, and Wickard v. Filburn carried it onto one farm in 1942. South Dakota v. Dole approved money with strings in 1987. United States v. Lopez set a limit on the commerce power in 1995, Gonzales v. Raich reached homegrown marijuana in 2005, and NFIB v. Sebelius limited the spending power in 2012.

1. 1819 McCulloch: Congress has implied powers Congress may use any means "necessary and proper" to carry out its listed powers, and states cannot tax a federal bank.
2. 1937 Commerce power grows to cover factories NLRB v. Jones & Laughlin Steel upheld federal labor law for a steel company, opening the New Deal era.
3. 1942 Wickard: one farm counts Wheat grown for home use could be regulated because, added up, it affects the national market.
4. 1987 Dole: grants can carry conditions Congress could withhold 5% of highway funds from states with a drinking age under 21.
5. 1995 Lopez: a limit on the commerce power A federal ban on guns near schools was struck, 5-4, because having a gun in a school zone is "in no sense an economic activity."
6. 2005 Raich: federal drug law reaches home gardens Marijuana grown in California for personal medical use, legal under state law, was still covered by federal law, 6-3.
7. 2012 NFIB: a limit on the spending power Threatening a state's existing Medicaid money to force the expansion was coercion, so states could opt out.

Sources: the Supreme Court opinions, via Cornell Legal Information Institute.

The rulings that set the limits of federal power: 1819: McCulloch: Congress has implied powers (Congress may use any means "necessary and proper" to carry out its listed powers, and states cannot tax a federal bank.). 1937: Commerce power grows to cover factories (NLRB v. Jones & Laughlin Steel upheld federal labor law for a steel company, opening the New Deal era.). 1942: Wickard: one farm counts (Wheat grown for home use could be regulated because, added up, it affects the national market.). 1987: Dole: grants can carry conditions (Congress could withhold 5% of highway funds from states with a drinking age under 21.). 1995: Lopez: a limit on the commerce power (A federal ban on guns near schools was struck, 5-4, because having a gun in a school zone is "in no sense an economic activity."). 2005: Raich: federal drug law reaches home gardens (Marijuana grown in California for personal medical use, legal under state law, was still covered by federal law, 6-3.). 2012: NFIB: a limit on the spending power (Threatening a state's existing Medicaid money to force the expansion was coercion, so states could opt out.).

1819: In McCulloch v. Maryland, the Court said Congress has powers implied by its listed ones, and that Maryland could not tax the national bank.

1937: In NLRB v. Jones & Laughlin Steel, the Court upheld the National Labor Relations Act for a steel maker. The Court later called it a “watershed case” that dropped the old line between “direct” and “indirect” effects on commerce (Lopez).

1942: Roscoe Filburn was allowed 11.1 acres of wheat. He sowed 23, and the 239 bushels from the extra acres drew a penalty of 49 cents a bushel, $117.11 in all. His practice was to sell some of his wheat and keep the rest for feed, flour and seed, though the Court noted his plans for this crop were never stated. The unanimous Court, in Wickard v. Filburn on November 9, 1942, said his own effect on wheat demand “may be trivial by itself” but counted once added to many farmers like him.

1987: Congress told states it would withhold 5% of certain highway funds unless they raised the drinking age to 21. South Dakota sued and lost 7-2 in South Dakota v. Dole on June 23, 1987. The Court called the penalty “relatively mild encouragement.” The minimum legal drinking age in the United States is now 21 (CDC).

1995: Alfonso Lopez Jr., a high school senior in San Antonio, carried a handgun to school and was charged under the Gun-Free School Zones Act of 1990. On April 26, 1995, the Court ruled 5-4 in United States v. Lopez that Congress had reached past the commerce power, because having a gun in a school zone is “in no sense an economic activity.”

2005: Diane Monson grew her own marijuana for medical use under California law, and two caregivers grew it for Angel Raich. On June 6, 2005, in Gonzales v. Raich, the Court held 6-3 that federal drug law still applied, writing that “the similarities between this case and Wickard are striking.”

2012: In NFIB v. Sebelius, decided June 28, 2012, Chief Justice John Roberts wrote that threatening a state’s existing Medicaid money to force the expansion was “a gun to the head,” because it put at risk “over 10 percent of a State’s overall budget.” Justices Stephen Breyer and Elena Kagan joined that part of his opinion, and the four dissenters agreed, so seven justices found the threat went too far. States became free to decline the expansion, and some still have.

Where State Money Comes From

About one of every three dollars states spend comes from Washington. In fiscal 2025 states spent an estimated $3.21 trillion in all, and $1.08 trillion of it was federal money, according to the National Association of State Budget Officers. That money is the spending lever in practice. A condition on a grant reaches a state only as far as the state depends on that grant.

Federal money pays for most of Medicaid and almost none of the prisons. The chart shows what share of each state program ran on federal funds in fiscal 2025.

Federal money pays for most of state Medicaid and little of state prisons

Category	Value
Medicaid: share paid with federal funds	62.7%
Roads and transit: share paid with federal funds	25.8%
K-12 schools: share paid with federal funds	15.7%
Public colleges: share paid with federal funds	12.6%
Prisons and corrections: share paid with federal funds	4%

Source: NASBO, 2025 State Expenditure Report, Table 3, fiscal 2025 estimates. Each share is the federal funds spent on that program divided by all state spending on it.

That gap explains where federal pressure lands. Washington has the most leverage over health coverage, where it pays about 63 cents of every state Medicaid dollar, and the least over criminal justice, which states pay for almost entirely from their own taxes. Those taxes differ widely, too: some states tax no wages at all and lean on sales and property taxes instead. Schools sit in between: federal funds paid about 16% of state K-12 spending.

How much your state depends on federal money varies by more than two to one. Louisiana ran 48.6% of its spending on federal funds. Illinois ran 16.5%. Pick your state to see its share.

How much of your state's budget comes from Washington?

Choose your state to see what share of its fiscal 2025 spending came from federal funds, from the state budget officers' own report.

Choose your state to see its rules Select a state AlabamaAlaskaArizonaArkansasCaliforniaColoradoConnecticutDelawareDistrict of ColumbiaFloridaGeorgiaHawaiiIdahoIllinoisIndianaIowaKansasKentuckyLouisianaMaineMarylandMassachusettsMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNew HampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWest VirginiaWisconsinWyoming

NASBO warns that states count funds differently, so small gaps between states can reflect bookkeeping. These are fiscal 2025 estimates, before the 2025 budget law's Medicaid and SNAP changes take effect.

Federal share of state spending

• Under 30% (17 states)
• 30% to 40% (22 states)
• 40% or more (11 states)
• D.C. (not reported)

Sources: NASBO, 2025 State Expenditure Report, Table 1 (fiscal 2025 estimates). Verified September 26, 2026.

Federal share of state spending

State	Federal share of state spending	All 50 states combined
Alabama	39.4% of state spending came from federal funds	33.5% across all 50 states
Alaska	45.3% of state spending came from federal funds	33.5% across all 50 states
Arizona	24.4% of state spending came from federal funds	33.5% across all 50 states
Arkansas	33.9% of state spending came from federal funds	33.5% across all 50 states
California	33.8% of state spending came from federal funds	33.5% across all 50 states
Colorado	28.5% of state spending came from federal funds	33.5% across all 50 states
Connecticut	24.8% of state spending came from federal funds	33.5% across all 50 states
Delaware	22.5% of state spending came from federal funds	33.5% across all 50 states
District of Columbia	Not reported. NASBO has no fiscal 2025 figures for D.C.	33.5% across all 50 states
Florida	33.5% of state spending came from federal funds	33.5% across all 50 states
Georgia	28.8% of state spending came from federal funds	33.5% across all 50 states
Hawaii	22.2% of state spending came from federal funds	33.5% across all 50 states
Idaho	38.3% of state spending came from federal funds	33.5% across all 50 states
Illinois	16.5% of state spending came from federal funds	33.5% across all 50 states
Indiana	46.4% of state spending came from federal funds	33.5% across all 50 states
Iowa	33.1% of state spending came from federal funds	33.5% across all 50 states
Kansas	27.4% of state spending came from federal funds	33.5% across all 50 states
Kentucky	39.4% of state spending came from federal funds	33.5% across all 50 states
Louisiana	48.6% of state spending came from federal funds	33.5% across all 50 states
Maine	36.9% of state spending came from federal funds	33.5% across all 50 states
Maryland	31.2% of state spending came from federal funds	33.5% across all 50 states
Massachusetts	27.5% of state spending came from federal funds	33.5% across all 50 states
Michigan	41.8% of state spending came from federal funds	33.5% across all 50 states
Minnesota	31% of state spending came from federal funds	33.5% across all 50 states
Mississippi	44.8% of state spending came from federal funds	33.5% across all 50 states
Missouri	43.1% of state spending came from federal funds	33.5% across all 50 states
Montana	40.9% of state spending came from federal funds	33.5% across all 50 states
Nebraska	27.7% of state spending came from federal funds	33.5% across all 50 states
Nevada	36.7% of state spending came from federal funds	33.5% across all 50 states
New Hampshire	39.4% of state spending came from federal funds	33.5% across all 50 states
New Jersey	29.6% of state spending came from federal funds	33.5% across all 50 states
New Mexico	44.4% of state spending came from federal funds	33.5% across all 50 states
New York	38.7% of state spending came from federal funds	33.5% across all 50 states
North Carolina	39.8% of state spending came from federal funds	33.5% across all 50 states
North Dakota	34.5% of state spending came from federal funds	33.5% across all 50 states
Ohio	38.8% of state spending came from federal funds	33.5% across all 50 states
Oklahoma	40.4% of state spending came from federal funds	33.5% across all 50 states
Oregon	30.4% of state spending came from federal funds	33.5% across all 50 states
Pennsylvania	39.4% of state spending came from federal funds	33.5% across all 50 states
Rhode Island	38.5% of state spending came from federal funds	33.5% across all 50 states
South Carolina	33% of state spending came from federal funds	33.5% across all 50 states
South Dakota	42.4% of state spending came from federal funds	33.5% across all 50 states
Tennessee	43.4% of state spending came from federal funds	33.5% across all 50 states
Texas	35.9% of state spending came from federal funds	33.5% across all 50 states
Utah	29.6% of state spending came from federal funds	33.5% across all 50 states
Vermont	38.2% of state spending came from federal funds	33.5% across all 50 states
Virginia	27.7% of state spending came from federal funds	33.5% across all 50 states
Washington	25.2% of state spending came from federal funds	33.5% across all 50 states
West Virginia	20.5% of state spending came from federal funds	33.5% across all 50 states
Wisconsin	26.9% of state spending came from federal funds	33.5% across all 50 states
Wyoming	18% of state spending came from federal funds	33.5% across all 50 states

See all states in a table

All states Under 30% (17 states)30% to 40% (22 states)40% or more (11 states)D.C. (not reported) Showing 51 of 51 states

State	Federal share of state spending	All 50 states combined
Alabama	39.4% of state spending came from federal funds	33.5% across all 50 states
Alaska	45.3% of state spending came from federal funds	33.5% across all 50 states
Arizona	24.4% of state spending came from federal funds	33.5% across all 50 states
Arkansas	33.9% of state spending came from federal funds	33.5% across all 50 states
California	33.8% of state spending came from federal funds	33.5% across all 50 states
Colorado	28.5% of state spending came from federal funds	33.5% across all 50 states
Connecticut	24.8% of state spending came from federal funds	33.5% across all 50 states
Delaware	22.5% of state spending came from federal funds	33.5% across all 50 states
District of Columbia	Not reported. NASBO has no fiscal 2025 figures for D.C.	33.5% across all 50 states
Florida	33.5% of state spending came from federal funds	33.5% across all 50 states
Georgia	28.8% of state spending came from federal funds	33.5% across all 50 states
Hawaii	22.2% of state spending came from federal funds	33.5% across all 50 states
Idaho	38.3% of state spending came from federal funds	33.5% across all 50 states
Illinois	16.5% of state spending came from federal funds	33.5% across all 50 states
Indiana	46.4% of state spending came from federal funds	33.5% across all 50 states
Iowa	33.1% of state spending came from federal funds	33.5% across all 50 states
Kansas	27.4% of state spending came from federal funds	33.5% across all 50 states
Kentucky	39.4% of state spending came from federal funds	33.5% across all 50 states
Louisiana	48.6% of state spending came from federal funds	33.5% across all 50 states
Maine	36.9% of state spending came from federal funds	33.5% across all 50 states
Maryland	31.2% of state spending came from federal funds	33.5% across all 50 states
Massachusetts	27.5% of state spending came from federal funds	33.5% across all 50 states
Michigan	41.8% of state spending came from federal funds	33.5% across all 50 states
Minnesota	31% of state spending came from federal funds	33.5% across all 50 states
Mississippi	44.8% of state spending came from federal funds	33.5% across all 50 states
Missouri	43.1% of state spending came from federal funds	33.5% across all 50 states
Montana	40.9% of state spending came from federal funds	33.5% across all 50 states
Nebraska	27.7% of state spending came from federal funds	33.5% across all 50 states
Nevada	36.7% of state spending came from federal funds	33.5% across all 50 states
New Hampshire	39.4% of state spending came from federal funds	33.5% across all 50 states
New Jersey	29.6% of state spending came from federal funds	33.5% across all 50 states
New Mexico	44.4% of state spending came from federal funds	33.5% across all 50 states
New York	38.7% of state spending came from federal funds	33.5% across all 50 states
North Carolina	39.8% of state spending came from federal funds	33.5% across all 50 states
North Dakota	34.5% of state spending came from federal funds	33.5% across all 50 states
Ohio	38.8% of state spending came from federal funds	33.5% across all 50 states
Oklahoma	40.4% of state spending came from federal funds	33.5% across all 50 states
Oregon	30.4% of state spending came from federal funds	33.5% across all 50 states
Pennsylvania	39.4% of state spending came from federal funds	33.5% across all 50 states
Rhode Island	38.5% of state spending came from federal funds	33.5% across all 50 states
South Carolina	33% of state spending came from federal funds	33.5% across all 50 states
South Dakota	42.4% of state spending came from federal funds	33.5% across all 50 states
Tennessee	43.4% of state spending came from federal funds	33.5% across all 50 states
Texas	35.9% of state spending came from federal funds	33.5% across all 50 states
Utah	29.6% of state spending came from federal funds	33.5% across all 50 states
Vermont	38.2% of state spending came from federal funds	33.5% across all 50 states
Virginia	27.7% of state spending came from federal funds	33.5% across all 50 states
Washington	25.2% of state spending came from federal funds	33.5% across all 50 states
West Virginia	20.5% of state spending came from federal funds	33.5% across all 50 states
Wisconsin	26.9% of state spending came from federal funds	33.5% across all 50 states
Wyoming	18% of state spending came from federal funds	33.5% across all 50 states

Sources: NASBO, 2025 State Expenditure Report, Table 1 (fiscal 2025 estimates). Verified September 26, 2026.

Who Decides What in Your Life

Most of what touches your daily life is decided by your state, with federal money and federal floors underneath. The table sorts six areas by who sets the rules.

The split explains why the same vote can matter more at the state capitol than in Washington. Since Dobbs, for example, abortion law is set state by state, which our Dobbs explainer tracks with a state finder.

Federalism Fights in 2025 and 2026

Most of the current fights are over federal money with new strings attached, and states have won most of them in court so far. The pattern repeats: an agency adds a condition Congress never wrote, such as help with immigration enforcement or changes to election rules, and a group of states sues. Courts have also narrowed the president’s power to send states’ National Guard troops into cities.

Where the main federalism fights stand

As of September 26, 2026

• Election and immigration conditions on disaster and homeland security grants In litigation, filed July 2026

  More than two dozen states sued in federal court in Rhode Island on July 23, 2026. States risk losing at least 20% of Homeland Security Grant Program money if they refuse. (source)

• Cutting grants to sanctuary cities and counties Blocked by a court, on appeal

  Judge William Orrick blocked the cuts on April 24, 2025 and extended it to 34 more cities and counties on August 22, 2025. The government's Ninth Circuit appeal had not been decided as of April 2026. (source)

• Immigration conditions on transportation grants Final ruling, appeal dropped

  A Rhode Island federal judge ruled the condition unlawful on November 4, 2025, and the Transportation Department dropped its appeal on January 13, 2026. (source)

• Ending $600 million in CDC grants to four states Blocked by a court, preliminary

  A federal court in Illinois issued a preliminary injunction on March 13, 2026. (source)

• Justice Department suits against state and city sanctuary laws In litigation, mostly dismissed

  Courts dismissed the suits against Illinois (July 25, 2025), New York (November 17, 2025), Colorado (March 31, 2026), Boston (May 28, 2026), New Jersey cities (June 24, 2026) and Minnesota (July 20, 2026). The Maryland suit, filed July 9, 2026, followed 20 others. (source)

• Federalizing a state's National Guard (Section 12406) Blocked by a court, narrowed

  In Trump v. Illinois on December 23, 2025, the Supreme Court denied a stay, concluding that "regular forces" likely means the regular military, which kept the Chicago deployment blocked. (source)

The grant cases turn on the rule from Dole and NFIB: a condition has to be clear, related to the program, and not so large a state has no real choice. Courts have added a simpler question. Did Congress authorize the condition at all, or did an agency write it on its own? The Guard case is about a different line, when the president can take command of troops a governor normally controls, which our National Guard explainer walks through. Our posse comitatus explainer covers the limits on using the military at home.

The Argument Over How Much Power Belongs Where

People disagree about federalism in good faith, and both parties have used it. Supporters of strong states echo Justice Louis Brandeis, who wrote in a 1932 dissent that “a single courageous state may, if its citizens choose, serve as a laboratory” without risk to the rest of the country (New State Ice Co. v. Liebmann). Supporters of strong national power point out that “states’ rights” was the banner Southern states raised against desegregation, and that federal civil rights law ended legal segregation where states would not.

A few distinctions keep the argument honest:

• Federalism is a tool, not a party position. Republican-led states invoked it against the Affordable Care Act in NFIB. Democratic-led states invoke it now against federal immigration demands, in the same courts and under the same precedents.
• A strong federal floor and strong states can coexist. Civil rights law sets a minimum, and states can go further, as many do on minimum wages and voting access.
• Money is not the same as a mandate. A state can turn down a federal grant, and Washington can stop paying. The legal fights are over conditions attached after the fact, or so large a state cannot say no.
• The Supremacy Clause still binds. A state cannot declare a valid federal law void. The Eighth Circuit struck Missouri’s attempt to do that with federal gun laws on August 26, 2024 (opinion).

What You Can Do

1. Look up your state’s share above, then read its budget. Your state budget office publishes where each dollar comes from. When Washington threatens a grant, that number tells you how much is at risk.
2. Follow your attorney general’s lawsuits. Most grant-condition fights are brought by state attorneys general, and their press pages list every case. Ask yours which cases the state has joined and why.
3. Contact the level that decides. For schools, election rules, policing and Medicaid eligibility, your state legislator usually has more say than your member of Congress. Our preemption explainer shows what your state also blocks your city from doing.
4. Ask Congress to write conditions itself. Many 2025-26 grant fights exist because agencies added strings Congress never passed. Use our guide to writing your representative to ask your members of Congress to settle grant conditions in law.