Sen. David Long (IN)

Sen. Ginny Burdick (OR)

Sen. Eduardo Bhatia (PR)

John Burchett (Google)

Sen. Wayne Niederhauser (UT)

Sen. Susan Wagle (KS)

Sen. Harry Brown (TX)

Sen. Martin Looney (CT)

David C. Quam

JULY 2017 CONFERENCE

Balancing State Rights
and Federalism

David C. Quam

Partner at Nelson Mullins Riley & Scarborough
former Deputy Director of the National Governors’ Association

Balancing State Rights and Federalism

Insights on the past, present, and near future of state/federal relations were presented by David C. Quam, a Partner at Nelson Mullins Riley & Scarborough and former Deputy Director of the National Governors’ Association. Mr. Quam has extensive experience in bipartisan policy solutions for complex state and federal policy issues. He examined the factors influencing the current relationship between State and Federal leaders, and proposed strategies to find the shared goals and objectives that would drive a more unified agenda.

The History of Dual Sovereignty

Dual sovereignty is the foundation for federalism, Mr. Quam reminded the Forum. He reviewed the Constitutional Amendments that have had an impact on the framework of federalism.  The Tenth Amendment to the Constitution, ratified in 1791, states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Originally, Article I; Section 3, Clause 1 of the Amendment, reserved to the Legislature the power to elect the States’ Senators. However, in 1913, Amendment XVII changed this to direct election of the Senators by the people. This was a significant event in the relationship between federal and states’ rights, Mr. Quam noted, and has had lasting effects, often weakening the relationships between State legislatures and their federal State representatives. Mr. Quam stressed the importance of having federal Senators visit and consult with their State legislatures on a regular basis.

Threats to Dual Sovereignty

There are persistent threats to dual sovereignty that obstruct opportunities for Collaborative Federalism, Mr. Quam said. He explained the challenges created by Unfunded Mandates, Preemption, Maintenance of Effort, and the Commerce Clause.

Unfunded Mandates

The Preemption Doctrine

The preemption doctrine, which refers to the idea that a higher authority of law will displace the law of a lower authority of law when the two authorities come into conflict, can have significant consequences for the States, Mr. Quam noted.

When state law and federal law conflict, federal law displaces, or preempts, state law, due to the Supremacy Clause of the Constitution. Preemption applies regardless of whether the conflicting laws come from legislatures, courts, administrative agencies, or constitutions. For example, the Voting Rights Act, an act of Congress, preempts state constitutions, and FDA regulations may preempt state court judgments in cases involving prescription drugs. The Preemption Doctrine may also come into play with small parts of bills. If an entity, such as a corporation, wants to preempt State regulations, they can work at the federal level and, if successful, the Preemption Doctrine will allow them to impact all 50 states, rather than have to work on state-by-state revisions to the law.

Maintenance of Effort

The Maintenance of Effort (“MOE”) provision requires States to maintain the level of their investment for selected programs that receive matching federal funds. This limits the power of the States to manage their own finances as circumstances change, Mr. Quam opined.

The Commerce Clause

The Commerce Clause of the US Constitution gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” Congress has often used the Commerce Clause to justify exercising legislative power over the activities of States, despite the Tenth Amendment that provides that any powers that are not delegated to Congress by the Constitution are reserved for the states. The conflict between these two principles has fueled significant controversy regarding the balance of power between the federal government and the states. The Commerce Clause has enabled the reach of the Federal government to far exceed the intentions of the Founding Fathers, Mr. Quam said.

Rebalancing Power Between the Federal Government and the States

Mr. Quam reported several examples where the States prevailed on the Federal government to make changes, including Welfare Reform, unfunded mandates, and limiting the Commerce Clause.

Welfare Reform

The States, along with their Governors, were effective in driving welfare reform with efforts culminating in the Personal Responsibility and Work Opportunities Reconciliation Act of 1996, which fundamentally transformed the roles of state governments in administering welfare. The Act sets strict federal requirements about work and limits on how long families can receive federally aided welfare benefits, now called Temporary Assistance for Needy Families (TANF), encourages states to develop their own welfare reforms by adopting variants on the work-first approach, emphasizing quick engagement in work-related activities and moving people off public assistance.

Reining in Unfunded Mandates

In response to the growing  burden of unfunded mandates on the States, Congress passed the Unfunded Mandates Reform Act of 1995 (UMRA) to limit the number of unfunded federal mandates imposed by the federal government on State, local, and tribal governments. UMRA defines a mandate as any provision in legislation, statute, or regulation that would impose an enforceable duty on state, local, or tribal governments or the private sector, or that would reduce or eliminate the amount of funding authorized to cover the costs of existing mandates.

Limiting the Commerce Clause

In the case of US v. Lopez, a student found carrying a firearm into a school was charged with violating the federal Gun-Free School Zones Act of 1990. A debate ensued, centered on whether the Act was a constitutional exercise of Congress' power to regulate activities as they affect interstate commerce under the Commerce Clause, or if the Act exceeded the lawmaking authority conferred by the Commerce Clause. The Supreme Court ruled that, while Congress had broad lawmaking authority under the Commerce Clause, the power was limited, and did not extend so far from "commerce" as to authorize the regulation of the carrying of handguns, especially when there was no evidence that carrying them affected the economy on a massive scale.

In the Supreme Court decision in National Federation of Independent Business v. Sibelius, the Affordable Care Act’s individual mandate to buy health insurance was ruled a constitutional exercise of Congress' taxing power but not a proper application of Congress's Commerce Clause. Additionally, a majority of the justices also agreed that the requirement to expand Medicaid was not a valid exercise of Congress's spending power, as it would coerce states to either accept the expansion or risk losing existing Medicaid funding.

The Shifting Federal/State Balance

Speaker Paul Ryan (R-WI) and Democratic Leader Nancy Pelosi (D-CA) initiated The Speakers’ Task Force on Intergovernmental Affairs in May, 2017. It is a bipartisan group charged to study ways to restore the proper balance of power between the federal government and states, tribal, and local governments, and to eliminate unnecessary regulatory burdens facing communities across the nation. “Is it all talk?” Mr. Quam queried. He argued that this is an opportunity for the voice of the States to be heard and for them to have direct influence on the Congress. It is a process which forces Congress to listen to the States.

Accountability for education is more focused on the States as the Every Student Succeeds Act (ESSA), signed in 2015, shifts educational accountability back to the States and local authorities, Mr. Quam reported. The bill is the first to reduce the federal government's role in elementary and secondary education since the 1980s. It seeks to find the right balance between the respective roles of the federal, state and local governments in formulating education policy.

International Trade is another area where State Senators can take a leadership role, Mr. Quam said. Trade negotiations and the monitoring of Foreign Domestic Investment (FDI) are appropriately conducted on a sub–national state level.

Mr. Quam reported that 20 years ago, the Office of Management and Budget (OMB) stopped reviewing State budgets. “Members of the Federal government have forgotten that most States are required to have balanced budgets, that their fiscal year ends on June 30, and that some legislatures do not meet every year,” Mr. Quam said. As a result of this disconnect, many Federal decisions are out-of-synch with the realities of the State’s fiscal decision–making.

The Solution: Collaborative Federalism

Mr. Quam proposed several areas where collaborative federalism could improve the Federal/State sharing of power. “The Federal government should exercise forbearance, weighing every decision to determine if it is really necessary,” he said. He recommended that the Federal government avoid exercising the Preemption except in cases of profound national need.

The Federal government should avoid cost shifts to the States and unfunded mandates and also share savings with the States when they implement cost-cutting programs.  He argued for the discontinuation of the “Maintenance of Effort” provisions, stating that they are a disincentive for States to invest long-term, because once there is a commitment to contribute, the States have to continue to make the allocation, even if needs change.

Finally, Mr. Quam championed the movement toward increased State flexibility. He suggested that consolidated funding streams from the federal government would enable the states to find creative and innovative solutions to local problems.

Mr. Quam concluded with three comments:

1. If something is not prohibited by a Federal or State law, the States can do it.

2. The States working together on a regional collaborative basis will build political will at the Federal level to support the States’ agenda. Let the States figure out the best way to get the job done.

3. Hold the Federal government accountable for their role to preserve and protect our nation.

Q & A

Sen. David Long (IN): What are some of the opportunities you see for States to form regional coalitions?

Mr. Quam: Opportunities would focus on regional similarities and shared issues such as education, creating economic zones, workforce development, apprentice and intern programs. Regional collaborations in these areas would attract more Federal interest. If 3 States collaborate, their 6 Federal senators can help support their programs in Congress.  The States will develop and share best practices. Emulate what others have proved to be successful.

Sen. Martin Looney (CT): In the 1990s, in US vs Lopez, the Supreme Court, citing the Tenth Amendment, ruled that the Brady Act put too heavy a burden on the States for them to enforce it. Could this same rationale help States to resist new Immigration Laws? The Federal government cannot conscript the States to enforce Federal laws, therefore, it is not the job of the States to enforce Immigration Laws.

Mr. Quam: That is true.

Sen. Ginny Burdick (OR): States that have declared themselves “Sanctuary States,” and refuse to enforce Immigration Law are at risk of punitive actions from the Federal government. Is this legal?

Mr. Quam: The Tenth Amendment makes it clear that the States cannot be conscripted and they are pushing back. The States have challenged the Federal government in the Supreme Court. Enforcement will not happen until the Supreme Court rules on this. “It will take a long time for Sanctuary States and Homeland Security to negotiate a workable process for enforcement of the Immigration Laws. Similarly, when the Real ID Law was enacted, 13 States refused to comply. Today, only 1 State still resists. It took 7 years to find a workable regulatory process that the States could accept.

Sen. Eduardo Bhatia (PR): What will be the impact on the states of Congress’ plan to repeal and replace the Affordable Care Act (ACA)?

Mr. Quam: Under the proposed plan, Congress hopes to save $800 billion over 10 years by slowing the growth rate of Medicaid. This means the States may lose $800 billion dollars.

Several Key Issues

Healthcare

The initial Medicaid expansion requirement under ACA threatened to withdraw all Medicaid funding if States did not expand their programs. In US vs. Lopez, the Supreme Court ruled that the Federal government cannot use the power of the purse to coerce the States, and thus limited the Medicaid expansion requirement. It returned some decision-making power to the states.

The proposed healthcare plan, based on per capita caps with adjustments, would give more authority to the States to make choices about healthcare services. Political responsibility for core services will come back to the States; for example, if a State reduces premiums, the State would have to absorb the costs.

The States need to educate their Federal representatives about the impact of proposed ACA changes on the States. The Federal Senators do not have to vote on the repeal of ACA immediately.

Tax Reform

Tax reform is another area that State Senators should be tracking closely, as Federal tax reform may impact tax-exempt municipal bonds, deductible State and local taxes, and sales tax deductions and would significantly affect the States.

The States have played a key role in driving sales tax collections from online retailers. The Streamlined Sales and Use Tax Agreement (SSUTA) was developed by 23 States and joined voluntarily by most major online retailers with goals to align tax rules, create a common tax system to streamline the collection of sales taxes due to the States from online transactions. Since 2008, over $1 billion in Internet sales taxes have been collected by the States.

The States petitioned Congress to federalize the Agreement without success, until April, 2017, when the Remote Transactions Parity Act of 2017 was introduced “To grant States authority to enforce State and local sales and use tax laws on remote transactions, and for other purposes.” Speaker Paul Ryan was blocked from taking up the legislation by the Chair of the Judiciary Committee, who advised that the States have authority only within their States.

Meanwhile, North Dakota has appealed to the Supreme Court to overturn their decision in Quill vs. North Dakota, which would enable the States’ Remote Sales Tax to move forward. With the seating of Justice Neil Gorsuch, The Court now has sufficient votes to do this.

John Burchett (Google): All of the big companies with Internet sales are now collecting State sales taxes, will this change the issue?

Mr. Quam: As commerce online continues to grow and small business have an online presence, the potential for sales-tax revenue continues to increase.

Sen. Wayne Niederhauser (UT): Contrasted his experience providing testimony before Congress, where his introduction and presentation were scripted and had to be vetted ahead of time by the Committee. “In contrast, anyone can address the State legislature and we have to respond,” he said. “Don’t we know best how to address the needs of our people?”

Mr. Quam: A number of States have joined a coalition to consider action under Article V, which gives the States the power to propose Amendments to the US Constitution if two thirds (34) of the States’ legislatures participate. To date, 11 States are in the coalition, pursuing their goal to restrict the power and jurisdiction of the federal government and return authority to the States.

An alternative is to have the US Congress enact an Article V Amendment. However, it is not realistic to anticipate that three-fourths of the US Congress would support an Article V Amendment, which is required if Congress initiates the process. But if the States get motivated, they may be able to gather the necessary support.

Sen. Scott Sales (MT): The authority of the States will not be restored until the 17th Amendment (direct election of US Senators by the voters) is repealed, and this may be an impossible goal. However, a bill could be introduced to allow the legislature to select the candidates and then have the people vote on these candidates.

Mr. Quam: That bill would be amazing!

Sen. John Cullerton (IL): It is a brutal process to reinstate, even partially, a State tax. However, the Federal government is not planning on sharing the money they save by Federal cuts. It puts State legislators in a situation where they are forced to choose between cutting programs or raising taxes.

Mr. Quam: It’s imperative for the States to recognize that tax reform will be negative for the States. There is no voice giving the States’ view to Congress’ Joint Tax Committee. We need to educate the Federal government representatives to remind them of State fiscal policies and budgets. They are not aware of the consequences federal cuts have on the States.

Sen. Susan Wagle (KS): Will the Congress go ahead with tax reform without completing healthcare reform?

Mr. Quam: No. With only 7 weeks left in the session until the new fiscal year, there is no way the Congress can complete its objectives. The Border Adjustment tax is dead. Healthcare reform may be dead. How to pay for critical infrastructure improvements has not even been raised. For tax reform, the House of Representatives must approve a plan before the Christmas recess. A lot of work remains for this Congress to tackle.

Sen. Peter Courtney (OR): Pre-emption and unfunded mandates also are imposed by the State on local governments.  Great things can be done by the States, but it also is important to recognize local authority.

Mr. Quam: Respect and collaboration with local government and the States provides a model for the relations between the States and Federal officials.

Sen. Harry Brown (TX): The US deficit, blown out of proportion by Federal mandates, is the biggest threat to the states.

Preston Baldwin (CenterPoint): With the US deficit approaching $20 trillion, the national debt is a major concern. Looking ahead, Social Security could be at risk. In the past, there were five workers for each retiree; today, there are only two.

Mr. Quam: The Federal government is not taking the debt seriously. In the 1990s, the US had a balanced budget for one year under President Clinton. In 2000, the Medicare Part D program was paid for “on paper” from the budget surplus. In recent years, the threat of sequester, which puts a cap on Congressional spending and requires a budget resolution to exceed the caps, was considered so draconian that it would force the Congress to find a solution. But it didn’t work. Instead, the Congress made exceptions.

Sen. Martin Looney (CT): The Supreme Court decision in the case of the National Federation of Small Business vs Sibelius prohibited withholding of Federal funds from the States that did not comply with Federal healthcare legislation. It limits Congressional coercion of the States. Would you expect the Court to revisit earlier decisions which allowed Congressional coercion?

Mr. Quam: With the appointment of Justice Neil Gorsuch, the Court has become more conservative and the Tenth Amendment, protecting the powers of the States, is stronger. Both the left and the right are arguing for greater federalism to empower the States to make progress, because the Federal government is stalemated. Conservative Courts may support new innovations from State governments.

Speaker Biography

David C. Quam

As a pivotal member of the executive team at the National Governors Association (NGA), David was the organization’s chief strategist, lobbyist and political advisor regarding federal and state policy issues. He created and launched the NGA Office of International Trade and Investment to increase international trade, attract foreign direct investment and establish sub-national relationships with major trading partners across the globe. David oversaw the creation and ongoing operations of the Council of Governors, a 10-governor council appointed by the President, to advise the President and the U.S. Secretary of Defense on the National Guard. He also led the creation of the Governors Homeland Security Advisors Council to advise the U.S. Department of Homeland Security.

David saved states more than $2B annually by organizing a broad-based coalition to oppose federal restrictions on state nexus determinations. He spearheaded efforts to modernize state and local sales tax systems to better serve businesses and consumers conducting sales over the Internet, and organized opposition to federal mandates regarding the manufacturing and issuance of state drivers’ licenses and identification cards. Prior to his post as Deputy Director, he was Director, Office of Federal Relations at NGA.

Now a partner at Nelson Mullins, David provides clients with coordinated state and federal policy solutions, strategy, and representation, combined with knowledge in high-level policy negotiations, presidential and gubernatorial transitions, legislative drafting and process, state government, tax, intellectual property rights, homeland security, telecommunications, electronic commerce, international trade and investment, National Guard, education, Medicaid, regulatory reform, insurance, the Constitution, and veterans affairs.

This is a great time for the States to assert their authority. Acting together, States can get things done, while gridlock paralyzes the federal government. States can innovate and share best practices. This is a time when leadership by the States is critical.

— David Quam

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

Persistent threats to dual sovereignty: unfunded mandates, the Preemption Doctrine, and the Commerce Clause.

When state law and federal law conflict, federal law displaces, or preempts, state law, due to the Supremacy Clause of the Constitution.

The Commerce Clause has enabled the reach of the Federal government to far exceed the intentions of the Founding Fathers, Mr. Quam said.

The States took the lead in rebalancing Federal/State powers by driving decisions on  welfare reform, limiting unfunded mandates, and defining the limits of the Commerce Clause.

The States working together on a regional collaborative basis will build political will at the Federal level to support the States’ agenda.

Remote Transactions Parity Act of 2017 was introduced “To grant States authority to enforce State and local sales and use tax laws on remote transactions, and for other purposes.”

We need to educate the Federal government representatives to remind them of State fiscal policies and budgets. They are not aware of the consequences federal cuts have on the States.

CONTACT

Senate Presidents’ Forum

26 Main Street

Hastings-on-Hudson, NY 10706

 

Tel: 914-693-1818

Copyright © 2017 Senate Presidents' Forum. All rights reserved.

JULY 2017 CONFERENCE

Balancing State Rights
and Federalism

David C. Quam

Partner at Nelson Mullins Riley & Scarborough
former Deputy Director of the National Governors’ Association

Balancing State Rights and Federalism

Insights on the past, present, and near future of state/federal relations were presented by David C. Quam, a Partner at Nelson Mullins Riley & Scarborough and former Deputy Director of the National Governors’ Association. Mr. Quam has extensive experience in bipartisan policy solutions for complex state and federal policy issues. He examined the factors influencing the current relationship between State and Federal leaders, and proposed strategies to find the shared goals and objectives that would drive a more unified agenda.

This is a great time for the States to assert their authority. Acting together, States can get things done, while gridlock paralyzes the federal government. States can innovate and share best practices. This is a time when leadership by the States is critical.— David Quam

The History of Dual Sovereignty

Dual sovereignty is the foundation for federalism, Mr. Quam reminded the Forum. He reviewed the Constitutional Amendments that have had an impact on the framework of federalism.  The Tenth Amendment to the Constitution, ratified in 1791, states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Originally, Article I; Section 3, Clause 1 of the Amendment, reserved to the Legislature the power to elect the States’ Senators. However, in 1913, Amendment XVII changed this to direct election of the Senators by the people. This was a significant event in the relationship between federal and states’ rights, Mr. Quam noted, and has had lasting effects, often weakening the relationships between State legislatures and their federal State representatives. Mr. Quam stressed the importance of having federal Senators visit and consult with their State legislatures on a regular basis.

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

Threats to Dual Sovereignty

There are persistent threats to dual sovereignty that obstruct opportunities for Collaborative Federalism, Mr. Quam said. He explained the challenges created by Unfunded Mandates, Preemption, Maintenance of Effort, and the Commerce Clause.

Persistent threats to dual sovereignty: unfunded mandates, the Preemption Doctrine, and the Commerce Clause.

Unfunded Mandates

The Preemption Doctrine

The preemption doctrine, which refers to the idea that a higher authority of law will displace the law of a lower authority of law when the two authorities come into conflict, can have significant consequences for the States, Mr. Quam noted.

When state law and federal law conflict, federal law displaces, or preempts, state law, due to the Supremacy Clause of the Constitution. Preemption applies regardless of whether the conflicting laws come from legislatures, courts, administrative agencies, or constitutions. For example, the Voting Rights Act, an act of Congress, preempts state constitutions, and FDA regulations may preempt state court judgments in cases involving prescription drugs. The Preemption Doctrine may also come into play with small parts of bills. If an entity, such as a corporation, wants to preempt State regulations, they can work at the federal level and, if successful, the Preemption Doctrine will allow them to impact all 50 states, rather than have to work on state-by-state revisions to the law.

When state law and federal law conflict, federal law displaces, or preempts, state law, due to the Supremacy Clause of the Constitution.

Maintenance of Effort

The Maintenance of Effort (“MOE”) provision requires States to maintain the level of their investment for selected programs that receive matching federal funds. This limits the power of the States to manage their own finances as circumstances change, Mr. Quam opined.

The Commerce Clause

The Commerce Clause of the US Constitution gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” Congress has often used the Commerce Clause to justify exercising legislative power over the activities of States, despite the Tenth Amendment that provides that any powers that are not delegated to Congress by the Constitution are reserved for the states. The conflict between these two principles has fueled significant controversy regarding the balance of power between the federal government and the states. The Commerce Clause has enabled the reach of the Federal government to far exceed the intentions of the Founding Fathers, Mr. Quam said.

The Commerce Clause has enabled the reach of the Federal government to far exceed the intentions of the Founding Fathers, Mr. Quam said.

Rebalancing Power Between the Federal Government and the States

Mr. Quam reported several examples where the States prevailed on the Federal government to make changes, including Welfare Reform, unfunded mandates, and limiting the Commerce Clause.

Welfare Reform

The States, along with their Governors, were effective in driving welfare reform with efforts culminating in the Personal Responsibility and Work Opportunities Reconciliation Act of 1996, which fundamentally transformed the roles of state governments in administering welfare. The Act sets strict federal requirements about work and limits on how long families can receive federally aided welfare benefits, now called Temporary Assistance for Needy Families (TANF), encourages states to develop their own welfare reforms by adopting variants on the work-first approach, emphasizing quick engagement in work-related activities and moving people off public assistance.

The States took the lead in rebalancing Federal/State powers by driving decisions on  welfare reform, limiting unfunded mandates, and defining the limits of the Commerce Clause.

Reining in Unfunded Mandates

In response to the growing  burden of unfunded mandates on the States, Congress passed the Unfunded Mandates Reform Act of 1995 (UMRA) to limit the number of unfunded federal mandates imposed by the federal government on State, local, and tribal governments. UMRA defines a mandate as any provision in legislation, statute, or regulation that would impose an enforceable duty on state, local, or tribal governments or the private sector, or that would reduce or eliminate the amount of funding authorized to cover the costs of existing mandates.

Limiting the Commerce Clause

In the case of US v. Lopez, a student found carrying a firearm into a school was charged with violating the federal Gun-Free School Zones Act of 1990. A debate ensued, centered on whether the Act was a constitutional exercise of Congress' power to regulate activities as they affect interstate commerce under the Commerce Clause, or if the Act exceeded the lawmaking authority conferred by the Commerce Clause. The Supreme Court ruled that, while Congress had broad lawmaking authority under the Commerce Clause, the power was limited, and did not extend so far from "commerce" as to authorize the regulation of the carrying of handguns, especially when there was no evidence that carrying them affected the economy on a massive scale.

In the Supreme Court decision in National Federation of Independent Business v. Sibelius, the Affordable Care Act’s individual mandate to buy health insurance was ruled a constitutional exercise of Congress' taxing power but not a proper application of Congress's Commerce Clause. Additionally, a majority of the justices also agreed that the requirement to expand Medicaid was not a valid exercise of Congress's spending power, as it would coerce states to either accept the expansion or risk losing existing Medicaid funding.

The Shifting Federal/State Balance

Speaker Paul Ryan (R-WI) and Democratic Leader Nancy Pelosi (D-CA) initiated The Speakers’ Task Force on Intergovernmental Affairs in May, 2017. It is a bipartisan group charged to study ways to restore the proper balance of power between the federal government and states, tribal, and local governments, and to eliminate unnecessary regulatory burdens facing communities across the nation. “Is it all talk?” Mr. Quam queried. He argued that this is an opportunity for the voice of the States to be heard and for them to have direct influence on the Congress. It is a process which forces Congress to listen to the States.

Accountability for education is more focused on the States as the Every Student Succeeds Act (ESSA), signed in 2015, shifts educational accountability back to the States and local authorities, Mr. Quam reported. The bill is the first to reduce the federal government's role in elementary and secondary education since the 1980s. It seeks to find the right balance between the respective roles of the federal, state and local governments in formulating education policy.

International Trade is another area where State Senators can take a leadership role, Mr. Quam said. Trade negotiations and the monitoring of Foreign Domestic Investment (FDI) are appropriately conducted on a sub–national state level.

Mr. Quam reported that 20 years ago, the Office of Management and Budget (OMB) stopped reviewing State budgets. “Members of the Federal government have forgotten that most States are required to have balanced budgets, that their fiscal year ends on June 30, and that some legislatures do not meet every year,” Mr. Quam said. As a result of this disconnect, many Federal decisions are out-of-synch with the realities of the State’s fiscal decision–making.

The Solution: Collaborative Federalism

Mr. Quam proposed several areas where collaborative federalism could improve the Federal/State sharing of power. “The Federal government should exercise forbearance, weighing every decision to determine if it is really necessary,” he said. He recommended that the Federal government avoid exercising the Preemption except in cases of profound national need.

The Federal government should avoid cost shifts to the States and unfunded mandates and also share savings with the States when they implement cost-cutting programs.  He argued for the discontinuation of the “Maintenance of Effort” provisions, stating that they are a disincentive for States to invest long-term, because once there is a commitment to contribute, the States have to continue to make the allocation, even if needs change.

Finally, Mr. Quam championed the movement toward increased State flexibility. He suggested that consolidated funding streams from the federal government would enable the states to find creative and innovative solutions to local problems.

Mr. Quam concluded with three comments:

1. If something is not prohibited by a Federal or State law, the States can do it.

2. The States working together on a regional collaborative basis will build political will at the Federal level to support the States’ agenda. Let the States figure out the best way to get the job done.

3. Hold the Federal government accountable for their role to preserve and protect our nation.

The States working together on a regional collaborative basis will build political will at the Federal level to support the States’ agenda.

Q & A

Sen. David Long (IN): What are some of the opportunities you see for States to form regional coalitions?

Mr. Quam: Opportunities would focus on regional similarities and shared issues such as education, creating economic zones, workforce development, apprentice and intern programs. Regional collaborations in these areas would attract more Federal interest. If 3 States collaborate, their 6 Federal senators can help support their programs in Congress.  The States will develop and share best practices. Emulate what others have proved to be successful.

Sen. Martin Looney (CT): In the 1990s, in US vs Lopez, the Supreme Court, citing the Tenth Amendment, ruled that the Brady Act put too heavy a burden on the States for them to enforce it. Could this same rationale help States to resist new Immigration Laws? The Federal government cannot conscript the States to enforce Federal laws, therefore, it is not the job of the States to enforce Immigration Laws.

Mr. Quam: That is true.

Sen. Ginny Burdick (OR): States that have declared themselves “Sanctuary States,” and refuse to enforce Immigration Law are at risk of punitive actions from the Federal government. Is this legal?

Mr. Quam: The Tenth Amendment makes it clear that the States cannot be conscripted and they are pushing back. The States have challenged the Federal government in the Supreme Court. Enforcement will not happen until the Supreme Court rules on this. “It will take a long time for Sanctuary States and Homeland Security to negotiate a workable process for enforcement of the Immigration Laws. Similarly, when the Real ID Law was enacted, 13 States refused to comply. Today, only 1 State still resists. It took 7 years to find a workable regulatory process that the States could accept.

Sen. Eduardo Bhatia (PR): What will be the impact on the states of Congress’ plan to repeal and replace the Affordable Care Act (ACA)?

Mr. Quam: Under the proposed plan, Congress hopes to save $800 billion over 10 years by slowing the growth rate of Medicaid. This means the States may lose $800 billion dollars.

Several Key Issues

Healthcare

The initial Medicaid expansion requirement under ACA threatened to withdraw all Medicaid funding if States did not expand their programs. In US vs. Lopez, the Supreme Court ruled that the Federal government cannot use the power of the purse to coerce the States, and thus limited the Medicaid expansion requirement. It returned some decision-making power to the states.

The proposed healthcare plan, based on per capita caps with adjustments, would give more authority to the States to make choices about healthcare services. Political responsibility for core services will come back to the States; for example, if a State reduces premiums, the State would have to absorb the costs.

The States need to educate their Federal representatives about the impact of proposed ACA changes on the States. The Federal Senators do not have to vote on the repeal of ACA immediately.

Tax Reform

Tax reform is another area that State Senators should be tracking closely, as Federal tax reform may impact tax-exempt municipal bonds, deductible State and local taxes, and sales tax deductions and would significantly affect the States.

The States have played a key role in driving sales tax collections from online retailers. The Streamlined Sales and Use Tax Agreement (SSUTA) was developed by 23 States and joined voluntarily by most major online retailers with goals to align tax rules, create a common tax system to streamline the collection of sales taxes due to the States from online transactions. Since 2008, over $1 billion in Internet sales taxes have been collected by the States.

The States petitioned Congress to federalize the Agreement without success, until April, 2017, when the Remote Transactions Parity Act of 2017 was introduced “To grant States authority to enforce State and local sales and use tax laws on remote transactions, and for other purposes.” Speaker Paul Ryan was blocked from taking up the legislation by the Chair of the Judiciary Committee, who advised that the States have authority only within their States.

Remote Transactions Parity Act of 2017 was introduced “To grant States authority to enforce State and local sales and use tax laws on remote transactions, and for other purposes.”

Meanwhile, North Dakota has appealed to the Supreme Court to overturn their decision in Quill vs. North Dakota, which would enable the States’ Remote Sales Tax to move forward. With the seating of Justice Neil Gorsuch, The Court now has sufficient votes to do this.

John Burchett (Google): All of the big companies with Internet sales are now collecting State sales taxes, will this change the issue?

Mr. Quam: As commerce online continues to grow and small business have an online presence, the potential for sales-tax revenue continues to increase.

Sen. Wayne Niederhauser (UT): Contrasted his experience providing testimony before Congress, where his introduction and presentation were scripted and had to be vetted ahead of time by the Committee. “In contrast, anyone can address the State legislature and we have to respond,” he said. “Don’t we know best how to address the needs of our people?”

Mr. Quam: A number of States have joined a coalition to consider action under Article V, which gives the States the power to propose Amendments to the US Constitution if two thirds (34) of the States’ legislatures participate. To date, 11 States are in the coalition, pursuing their goal to restrict the power and jurisdiction of the federal government and return authority to the States.

An alternative is to have the US Congress enact an Article V Amendment. However, it is not realistic to anticipate that three-fourths of the US Congress would support an Article V Amendment, which is required if Congress initiates the process. But if the States get motivated, they may be able to gather the necessary support.

Sen. Scott Sales (MT): The authority of the States will not be restored until the 17th Amendment (direct election of US Senators by the voters) is repealed, and this may be an impossible goal. However, a bill could be introduced to allow the legislature to select the candidates and then have the people vote on these candidates.

Mr. Quam: That bill would be amazing!

Sen. John Cullerton (IL): It is a brutal process to reinstate, even partially, a State tax. However, the Federal government is not planning on sharing the money they save by Federal cuts. It puts State legislators in a situation where they are forced to choose between cutting programs or raising taxes.

Mr. Quam: It’s imperative for the States to recognize that tax reform will be negative for the States. There is no voice giving the States’ view to Congress’ Joint Tax Committee. We need to educate the Federal government representatives to remind them of State fiscal policies and budgets. They are not aware of the consequences federal cuts have on the States.

We need to educate the Federal government representatives to remind them of State fiscal policies and budgets. They are not aware of the consequences federal cuts have on the States.

Sen. Susan Wagle (KS): Will the Congress go ahead with tax reform without completing healthcare reform?

Mr. Quam: No. With only 7 weeks left in the session until the new fiscal year, there is no way the Congress can complete its objectives. The Border Adjustment tax is dead. Healthcare reform may be dead. How to pay for critical infrastructure improvements has not even been raised. For tax reform, the House of Representatives must approve a plan before the Christmas recess. A lot of work remains for this Congress to tackle.

Sen. Peter Courtney (OR): Pre-emption and unfunded mandates also are imposed by the State on local governments.  Great things can be done by the States, but it also is important to recognize local authority.

Mr. Quam: Respect and collaboration with local government and the States provides a model for the relations between the States and Federal officials.

Sen. Harry Brown (TX): The US deficit, blown out of proportion by Federal mandates, is the biggest threat to the states.

Preston Baldwin (CenterPoint): With the US deficit approaching $20 trillion, the national debt is a major concern. Looking ahead, Social Security could be at risk. In the past, there were five workers for each retiree; today, there are only two.

Mr. Quam: The Federal government is not taking the debt seriously. In the 1990s, the US had a balanced budget for one year under President Clinton. In 2000, the Medicare Part D program was paid for “on paper” from the budget surplus. In recent years, the threat of sequester, which puts a cap on Congressional spending and requires a budget resolution to exceed the caps, was considered so draconian that it would force the Congress to find a solution. But it didn’t work. Instead, the Congress made exceptions.

Sen. Martin Looney (CT): The Supreme Court decision in the case of the National Federation of Small Business vs Sibelius prohibited withholding of Federal funds from the States that did not comply with Federal healthcare legislation. It limits Congressional coercion of the States. Would you expect the Court to revisit earlier decisions which allowed Congressional coercion?

Mr. Quam: With the appointment of Justice Neil Gorsuch, the Court has become more conservative and the Tenth Amendment, protecting the powers of the States, is stronger. Both the left and the right are arguing for greater federalism to empower the States to make progress, because the Federal government is stalemated. Conservative Courts may support new innovations from State governments.

Speaker Biography

David C. Quam

As a pivotal member of the executive team at the National Governors Association (NGA), David was the organization’s chief strategist, lobbyist and political advisor regarding federal and state policy issues. He created and launched the NGA Office of International Trade and Investment to increase international trade, attract foreign direct investment and establish sub-national relationships with major trading partners across the globe. David oversaw the creation and ongoing operations of the Council of Governors, a 10-governor council appointed by the President, to advise the President and the U.S. Secretary of Defense on the National Guard. He also led the creation of the Governors Homeland Security Advisors Council to advise the U.S. Department of Homeland Security.

David saved states more than $2B annually by organizing a broad-based coalition to oppose federal restrictions on state nexus determinations. He spearheaded efforts to modernize state and local sales tax systems to better serve businesses and consumers conducting sales over the Internet, and organized opposition to federal mandates regarding the manufacturing and issuance of state drivers’ licenses and identification cards. Prior to his post as Deputy Director, he was Director, Office of Federal Relations at NGA.

Now a partner at Nelson Mullins, David provides clients with coordinated state and federal policy solutions, strategy, and representation, combined with knowledge in high-level policy negotiations, presidential and gubernatorial transitions, legislative drafting and process, state government, tax, intellectual property rights, homeland security, telecommunications, electronic commerce, international trade and investment, National Guard, education, Medicaid, regulatory reform, insurance, the Constitution, and veterans affairs.

JULY 2017 CONFERENCE

Balancing State Rights
and Federalism

David C. Quam

Partner at Nelson Mullins Riley & Scarborough
former Deputy Director of the National Governors’ Association

Balancing State Rights and Federalism

Insights on the past, present, and near future of state/federal relations were presented by David C. Quam, a Partner at Nelson Mullins Riley & Scarborough and former Deputy Director of the National Governors’ Association. Mr. Quam has extensive experience in bipartisan policy solutions for complex state and federal policy issues. He examined the factors influencing the current relationship between State and Federal leaders, and proposed strategies to find the shared goals and objectives that would drive a more unified agenda.

This is a great time for the States to assert their authority. Acting together, States can get things done, while gridlock paralyzes the federal government. States can innovate and share best practices. This is a time when leadership by the States is critical.— David Quam

The History of Dual Sovereignty

Dual sovereignty is the foundation for federalism, Mr. Quam reminded the Forum. He reviewed the Constitutional Amendments that have had an impact on the framework of federalism.  The Tenth Amendment to the Constitution, ratified in 1791, states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Originally, Article I; Section 3, Clause 1 of the Amendment, reserved to the Legislature the power to elect the States’ Senators. However, in 1913, Amendment XVII changed this to direct election of the Senators by the people. This was a significant event in the relationship between federal and states’ rights, Mr. Quam noted, and has had lasting effects, often weakening the relationships between State legislatures and their federal State representatives. Mr. Quam stressed the importance of having federal Senators visit and consult with their State legislatures on a regular basis.

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

Threats to Dual Sovereignty

There are persistent threats to dual sovereignty that obstruct opportunities for Collaborative Federalism, Mr. Quam said. He explained the challenges created by Unfunded Mandates, Preemption, Maintenance of Effort, and the Commerce Clause.

Persistent threats to dual sovereignty: unfunded mandates, the Preemption Doctrine, and the Commerce Clause.

Unfunded Mandates

The Preemption Doctrine

The preemption doctrine, which refers to the idea that a higher authority of law will displace the law of a lower authority of law when the two authorities come into conflict, can have significant consequences for the States, Mr. Quam noted.

When state law and federal law conflict, federal law displaces, or preempts, state law, due to the Supremacy Clause of the Constitution. Preemption applies regardless of whether the conflicting laws come from legislatures, courts, administrative agencies, or constitutions. For example, the Voting Rights Act, an act of Congress, preempts state constitutions, and FDA regulations may preempt state court judgments in cases involving prescription drugs. The Preemption Doctrine may also come into play with small parts of bills. If an entity, such as a corporation, wants to preempt State regulations, they can work at the federal level and, if successful, the Preemption Doctrine will allow them to impact all 50 states, rather than have to work on state-by-state revisions to the law.

When state law and federal law conflict, federal law displaces, or preempts, state law, due to the Supremacy Clause of the Constitution.

Maintenance of Effort

The Maintenance of Effort (“MOE”) provision requires States to maintain the level of their investment for selected programs that receive matching federal funds. This limits the power of the States to manage their own finances as circumstances change, Mr. Quam opined.

The Commerce Clause

The Commerce Clause of the US Constitution gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” Congress has often used the Commerce Clause to justify exercising legislative power over the activities of States, despite the Tenth Amendment that provides that any powers that are not delegated to Congress by the Constitution are reserved for the states. The conflict between these two principles has fueled significant controversy regarding the balance of power between the federal government and the states. The Commerce Clause has enabled the reach of the Federal government to far exceed the intentions of the Founding Fathers, Mr. Quam said.

The Commerce Clause has enabled the reach of the Federal government to far exceed the intentions of the Founding Fathers, Mr. Quam said.

Rebalancing Power Between the Federal Government and the States

Mr. Quam reported several examples where the States prevailed on the Federal government to make changes, including Welfare Reform, unfunded mandates, and limiting the Commerce Clause.

Welfare Reform

The States, along with their Governors, were effective in driving welfare reform with efforts culminating in the Personal Responsibility and Work Opportunities Reconciliation Act of 1996, which fundamentally transformed the roles of state governments in administering welfare. The Act sets strict federal requirements about work and limits on how long families can receive federally aided welfare benefits, now called Temporary Assistance for Needy Families (TANF), encourages states to develop their own welfare reforms by adopting variants on the work-first approach, emphasizing quick engagement in work-related activities and moving people off public assistance.

The States took the lead in rebalancing Federal/State powers by driving decisions on  welfare reform, limiting unfunded mandates, and defining the limits of the Commerce Clause.

Reining in Unfunded Mandates

In response to the growing  burden of unfunded mandates on the States, Congress passed the Unfunded Mandates Reform Act of 1995 (UMRA) to limit the number of unfunded federal mandates imposed by the federal government on State, local, and tribal governments. UMRA defines a mandate as any provision in legislation, statute, or regulation that would impose an enforceable duty on state, local, or tribal governments or the private sector, or that would reduce or eliminate the amount of funding authorized to cover the costs of existing mandates.

Limiting the Commerce Clause

In the case of US v. Lopez, a student found carrying a firearm into a school was charged with violating the federal Gun-Free School Zones Act of 1990. A debate ensued, centered on whether the Act was a constitutional exercise of Congress' power to regulate activities as they affect interstate commerce under the Commerce Clause, or if the Act exceeded the lawmaking authority conferred by the Commerce Clause. The Supreme Court ruled that, while Congress had broad lawmaking authority under the Commerce Clause, the power was limited, and did not extend so far from "commerce" as to authorize the regulation of the carrying of handguns, especially when there was no evidence that carrying them affected the economy on a massive scale.

In the Supreme Court decision in National Federation of Independent Business v. Sibelius, the Affordable Care Act’s individual mandate to buy health insurance was ruled a constitutional exercise of Congress' taxing power but not a proper application of Congress's Commerce Clause. Additionally, a majority of the justices also agreed that the requirement to expand Medicaid was not a valid exercise of Congress's spending power, as it would coerce states to either accept the expansion or risk losing existing Medicaid funding.

The Shifting Federal/State Balance

Speaker Paul Ryan (R-WI) and Democratic Leader Nancy Pelosi (D-CA) initiated The Speakers’ Task Force on Intergovernmental Affairs in May, 2017. It is a bipartisan group charged to study ways to restore the proper balance of power between the federal government and states, tribal, and local governments, and to eliminate unnecessary regulatory burdens facing communities across the nation. “Is it all talk?” Mr. Quam queried. He argued that this is an opportunity for the voice of the States to be heard and for them to have direct influence on the Congress. It is a process which forces Congress to listen to the States.

Accountability for education is more focused on the States as the Every Student Succeeds Act (ESSA), signed in 2015, shifts educational accountability back to the States and local authorities, Mr. Quam reported. The bill is the first to reduce the federal government's role in elementary and secondary education since the 1980s. It seeks to find the right balance between the respective roles of the federal, state and local governments in formulating education policy.

International Trade is another area where State Senators can take a leadership role, Mr. Quam said. Trade negotiations and the monitoring of Foreign Domestic Investment (FDI) are appropriately conducted on a sub–national state level.

Mr. Quam reported that 20 years ago, the Office of Management and Budget (OMB) stopped reviewing State budgets. “Members of the Federal government have forgotten that most States are required to have balanced budgets, that their fiscal year ends on June 30, and that some legislatures do not meet every year,” Mr. Quam said. As a result of this disconnect, many Federal decisions are out-of-synch with the realities of the State’s fiscal decision–making.

The Solution: Collaborative Federalism

Mr. Quam proposed several areas where collaborative federalism could improve the Federal/State sharing of power. “The Federal government should exercise forbearance, weighing every decision to determine if it is really necessary,” he said. He recommended that the Federal government avoid exercising the Preemption except in cases of profound national need.

The Federal government should avoid cost shifts to the States and unfunded mandates and also share savings with the States when they implement cost-cutting programs.  He argued for the discontinuation of the “Maintenance of Effort” provisions, stating that they are a disincentive for States to invest long-term, because once there is a commitment to contribute, the States have to continue to make the allocation, even if needs change.

Finally, Mr. Quam championed the movement toward increased State flexibility. He suggested that consolidated funding streams from the federal government would enable the states to find creative and innovative solutions to local problems.

Mr. Quam concluded with three comments:

1. If something is not prohibited by a Federal or State law, the States can do it.

2. The States working together on a regional collaborative basis will build political will at the Federal level to support the States’ agenda. Let the States figure out the best way to get the job done.

3. Hold the Federal government accountable for their role to preserve and protect our nation.

The States working together on a regional collaborative basis will build political will at the Federal level to support the States’ agenda.

Q & A

Sen. David Long (IN): What are some of the opportunities you see for States to form regional coalitions?

Mr. Quam: Opportunities would focus on regional similarities and shared issues such as education, creating economic zones, workforce development, apprentice and intern programs. Regional collaborations in these areas would attract more Federal interest. If 3 States collaborate, their 6 Federal senators can help support their programs in Congress.  The States will develop and share best practices. Emulate what others have proved to be successful.

Sen. Martin Looney (CT): In the 1990s, in US vs Lopez, the Supreme Court, citing the Tenth Amendment, ruled that the Brady Act put too heavy a burden on the States for them to enforce it. Could this same rationale help States to resist new Immigration Laws? The Federal government cannot conscript the States to enforce Federal laws, therefore, it is not the job of the States to enforce Immigration Laws.

Mr. Quam: That is true.

Sen. Ginny Burdick (OR): States that have declared themselves “Sanctuary States,” and refuse to enforce Immigration Law are at risk of punitive actions from the Federal government. Is this legal?

Mr. Quam: The Tenth Amendment makes it clear that the States cannot be conscripted and they are pushing back. The States have challenged the Federal government in the Supreme Court. Enforcement will not happen until the Supreme Court rules on this. “It will take a long time for Sanctuary States and Homeland Security to negotiate a workable process for enforcement of the Immigration Laws. Similarly, when the Real ID Law was enacted, 13 States refused to comply. Today, only 1 State still resists. It took 7 years to find a workable regulatory process that the States could accept.

Sen. Eduardo Bhatia (PR): What will be the impact on the states of Congress’ plan to repeal and replace the Affordable Care Act (ACA)?

Mr. Quam: Under the proposed plan, Congress hopes to save $800 billion over 10 years by slowing the growth rate of Medicaid. This means the States may lose $800 billion dollars.

Several Key Issues

Healthcare

The initial Medicaid expansion requirement under ACA threatened to withdraw all Medicaid funding if States did not expand their programs. In US vs. Lopez, the Supreme Court ruled that the Federal government cannot use the power of the purse to coerce the States, and thus limited the Medicaid expansion requirement. It returned some decision-making power to the states.

The proposed healthcare plan, based on per capita caps with adjustments, would give more authority to the States to make choices about healthcare services. Political responsibility for core services will come back to the States; for example, if a State reduces premiums, the State would have to absorb the costs.

The States need to educate their Federal representatives about the impact of proposed ACA changes on the States. The Federal Senators do not have to vote on the repeal of ACA immediately.

Tax Reform

Tax reform is another area that State Senators should be tracking closely, as Federal tax reform may impact tax-exempt municipal bonds, deductible State and local taxes, and sales tax deductions and would significantly affect the States.

The States have played a key role in driving sales tax collections from online retailers. The Streamlined Sales and Use Tax Agreement (SSUTA) was developed by 23 States and joined voluntarily by most major online retailers with goals to align tax rules, create a common tax system to streamline the collection of sales taxes due to the States from online transactions. Since 2008, over $1 billion in Internet sales taxes have been collected by the States.

The States petitioned Congress to federalize the Agreement without success, until April, 2017, when the Remote Transactions Parity Act of 2017 was introduced “To grant States authority to enforce State and local sales and use tax laws on remote transactions, and for other purposes.” Speaker Paul Ryan was blocked from taking up the legislation by the Chair of the Judiciary Committee, who advised that the States have authority only within their States.

Remote Transactions Parity Act of 2017 was introduced “To grant States authority to enforce State and local sales and use tax laws on remote transactions, and for other purposes.”

Meanwhile, North Dakota has appealed to the Supreme Court to overturn their decision in Quill vs. North Dakota, which would enable the States’ Remote Sales Tax to move forward. With the seating of Justice Neil Gorsuch, The Court now has sufficient votes to do this.

John Burchett (Google): All of the big companies with Internet sales are now collecting State sales taxes, will this change the issue?

Mr. Quam: As commerce online continues to grow and small business have an online presence, the potential for sales-tax revenue continues to increase.

Sen. Wayne Niederhauser (UT): Contrasted his experience providing testimony before Congress, where his introduction and presentation were scripted and had to be vetted ahead of time by the Committee. “In contrast, anyone can address the State legislature and we have to respond,” he said. “Don’t we know best how to address the needs of our people?”

Mr. Quam: A number of States have joined a coalition to consider action under Article V, which gives the States the power to propose Amendments to the US Constitution if two thirds (34) of the States’ legislatures participate. To date, 11 States are in the coalition, pursuing their goal to restrict the power and jurisdiction of the federal government and return authority to the States.

An alternative is to have the US Congress enact an Article V Amendment. However, it is not realistic to anticipate that three-fourths of the US Congress would support an Article V Amendment, which is required if Congress initiates the process. But if the States get motivated, they may be able to gather the necessary support.

Sen. Scott Sales (MT): The authority of the States will not be restored until the 17th Amendment (direct election of US Senators by the voters) is repealed, and this may be an impossible goal. However, a bill could be introduced to allow the legislature to select the candidates and then have the people vote on these candidates.

Mr. Quam: That bill would be amazing!

Sen. John Cullerton (IL): It is a brutal process to reinstate, even partially, a State tax. However, the Federal government is not planning on sharing the money they save by Federal cuts. It puts State legislators in a situation where they are forced to choose between cutting programs or raising taxes.

Mr. Quam: It’s imperative for the States to recognize that tax reform will be negative for the States. There is no voice giving the States’ view to Congress’ Joint Tax Committee. We need to educate the Federal government representatives to remind them of State fiscal policies and budgets. They are not aware of the consequences federal cuts have on the States.

We need to educate the Federal government representatives to remind them of State fiscal policies and budgets. They are not aware of the consequences federal cuts have on the States.

Sen. Susan Wagle (KS): Will the Congress go ahead with tax reform without completing healthcare reform?

Mr. Quam: No. With only 7 weeks left in the session until the new fiscal year, there is no way the Congress can complete its objectives. The Border Adjustment tax is dead. Healthcare reform may be dead. How to pay for critical infrastructure improvements has not even been raised. For tax reform, the House of Representatives must approve a plan before the Christmas recess. A lot of work remains for this Congress to tackle.

Sen. Peter Courtney (OR): Pre-emption and unfunded mandates also are imposed by the State on local governments.  Great things can be done by the States, but it also is important to recognize local authority.

Mr. Quam: Respect and collaboration with local government and the States provides a model for the relations between the States and Federal officials.

Sen. Harry Brown (TX): The US deficit, blown out of proportion by Federal mandates, is the biggest threat to the states.

Preston Baldwin (CenterPoint): With the US deficit approaching $20 trillion, the national debt is a major concern. Looking ahead, Social Security could be at risk. In the past, there were five workers for each retiree; today, there are only two.

Mr. Quam: The Federal government is not taking the debt seriously. In the 1990s, the US had a balanced budget for one year under President Clinton. In 2000, the Medicare Part D program was paid for “on paper” from the budget surplus. In recent years, the threat of sequester, which puts a cap on Congressional spending and requires a budget resolution to exceed the caps, was considered so draconian that it would force the Congress to find a solution. But it didn’t work. Instead, the Congress made exceptions.

Sen. Martin Looney (CT): The Supreme Court decision in the case of the National Federation of Small Business vs Sibelius prohibited withholding of Federal funds from the States that did not comply with Federal healthcare legislation. It limits Congressional coercion of the States. Would you expect the Court to revisit earlier decisions which allowed Congressional coercion?

Mr. Quam: With the appointment of Justice Neil Gorsuch, the Court has become more conservative and the Tenth Amendment, protecting the powers of the States, is stronger. Both the left and the right are arguing for greater federalism to empower the States to make progress, because the Federal government is stalemated. Conservative Courts may support new innovations from State governments.

Speaker Biography

David C. Quam

As a pivotal member of the executive team at the National Governors Association (NGA), David was the organization’s chief strategist, lobbyist and political advisor regarding federal and state policy issues. He created and launched the NGA Office of International Trade and Investment to increase international trade, attract foreign direct investment and establish sub-national relationships with major trading partners across the globe. David oversaw the creation and ongoing operations of the Council of Governors, a 10-governor council appointed by the President, to advise the President and the U.S. Secretary of Defense on the National Guard. He also led the creation of the Governors Homeland Security Advisors Council to advise the U.S. Department of Homeland Security.

David saved states more than $2B annually by organizing a broad-based coalition to oppose federal restrictions on state nexus determinations. He spearheaded efforts to modernize state and local sales tax systems to better serve businesses and consumers conducting sales over the Internet, and organized opposition to federal mandates regarding the manufacturing and issuance of state drivers’ licenses and identification cards. Prior to his post as Deputy Director, he was Director, Office of Federal Relations at NGA.

Now a partner at Nelson Mullins, David provides clients with coordinated state and federal policy solutions, strategy, and representation, combined with knowledge in high-level policy negotiations, presidential and gubernatorial transitions, legislative drafting and process, state government, tax, intellectual property rights, homeland security, telecommunications, electronic commerce, international trade and investment, National Guard, education, Medicaid, regulatory reform, insurance, the Constitution, and veterans affairs.