Implications of the Balanced Budget Act of 1997 for the “Devolution Revolution”

From an economist's perspective, the fiscal and administrative goals of the so-called “devolution revolution” include less federal intergovernmental aid, especially if fiscally equalizing; the substitution of block grants for matching grants; greater administrative flexibility for the states; and fewer underfunded mandates. This article uses these devolulionary yardsticks to analyze the major provisions of the federal Balanced Budget Act of 1997. These provisions fall far short of a “devolution revolution.” The act increases the level of federal assistance, leaves Medicaid as an open-ended entitlement, and preserves a strong role for the federal government in shaping intergovernmental grants. The article discusses the political forces moderating the act's devolutionary impact. Copyright , Oxford University Press.