Implications of the Balanced Budget Act of 1997 for the "Devolution Revolution"

From an economist's perspective, the fiscal and administrativegoals of the so-called "devolution revolution" include lessfederal intergovernmental aid, especially if fiscally equalizing;the substitution of block grants for matching grants; greateradministrative flexibility for the states; and fewer underfundedmandates. This article uses these devolulionary yardsticks toanalyze the major provisions of the federal Balanced BudgetAct of 1997. These provisions fall far short of a "devolutionrevolution." The act increases the level of federal assistance,leaves Medicaid as an open-ended entitlement, and preservesa strong role for the federal government in shaping intergovernmentalgrants. The article discusses the political forces moderatingthe act's devolutionary impact.