Presentation to Assembly Committee on Federalism and Interstate Relations

On Jan. 24, 2017, Mike Nichols, WPRI president, and Dan Benson, editor of the Project for 21st Century Federalism, testified in Madison before the Assembly Committee on Federalism and Interstate Relations. Here is a transcript of their presentation.

For those not familiar with the Wisconsin Policy Research Institute, WPRI was founded in 1987. We are a nonpartisan, nonprofit public policy research organization with a wide variety of donors, including the Bradley Foundation. We are guided by the belief that free markets, individual initiative, educational opportunity and limited, efficient government closest to the people, are the keys to economic prosperity and human dignity. 

We’re a state-level think tank. We’re concerned that the states, envisioned by James Madison to have powers “numerous and indefinite,” are slowly metamorphosing in ways large and small into extensions of the federal government.[i]  So about a year ago, we formed the Project for 21st Century Federalism. This three-year project is focused on real-world impacts of federal grants to state and local governments, how they often skew the decisions and priorities of state and local residents, impede local control, create an often-duplicative bureaucracy, waste money, increase state and local spending and often fail to accomplish their objective.

These federal grants to state and local governments grew from just $7 billion in 1960 prior to Lyndon Johnson’s Great Society to an estimated $628 billion today[ii] – about one-sixth of the federal budget.[iii] Wisconsin alone now receives nearly one-third of all state budget revenues from Washington, D.C. — and, as a result, has forfeited control over vast areas of policy and spending.

Since the launch of WPRI’s Project for 21st Century Federalism, we have examined hundreds of federally required annual Single Audits, published articles on how federal HUD grants have been misspent; how the federal Department of Housing and Urban Development is threatening to involve itself in local zoning regulations by threatening to withhold housing funds; and how local school districts and their staffs are burdened by annual federal audit requirements.

We do this not to foment distrust of government. We do it to help figure out how government can, where appropriate, be most responsive and, where possible, be least obtrusive.

As it is, mistrust of the federal government is at an all-time high.  Asked “how much of the time do you think you can trust government to do what is right?” over 80% of Americans now say “only some of the time” or “never.”   Other surveys show a large majority of Americans of all ages trust their local governments more than Washington to do a better job at solving their problems and responding to their needs.

In recent months, we have begun examining the federal reach into the state Department of Public Instruction and whether the grant system, rather than having a positive impact on the education of children in Wisconsin, may at times actually be counterproductive. Is effective and autonomous school leadership hampered by federal strings and strictures? Is the bureaucracy devouring or diverting valuable resources and time that should be spent preparing our students to compete in the global marketplace?

We’re just getting started delving into these questions. But our initial research already shows that in the 2015-’17 biennial budget, the equivalent of 302 full-time equivalent employees out of 634 are paid fully by the federal government. That’s an increase of more than 63 percent in the federally supported DPI workforce over the last 20 years at a time when DPI’s overall employee count has been pretty static. In sum, 20 years ago, federally paid DPI staffers comprised less than 28 percent of the DPI workforce; today it’s 48 percent. That number, of course, does not include the untold hundreds at local school districts throughout the state who also are paid through federal programs.

We’re releasing this research to the media and policy-makers and Wisconsin’s citizens today, and we’ve included a story synopsizing our findings in the handout you should have in front on you. You can read all this for yourself, but here are a couple other key findings:

  • Almost all of those federally paid personnel are required by federal regulations to fill out “time and effort” sheets. In an effort to determine just what these people do and how many are employed in classroom work, WPRI examined more than 2,000 pages of these federal time sheets completed by 298 DPI staffers for the 2014-’15 fiscal year. We found these DPI employees are paid through 59 separate federal programs from the departments of Education, Agriculture, Health and Human Services, among others, and there are 136 subcategories within those programs.
  • We have requested but not yet received job descriptions for each of those 298 people and their supervisors, so while we don’t yet know exactly what they do, it appears 135 or them, or 45 percent, are not directly involved in the classroom. They include administrators, accountants, attorneys, grants specialists, budget analysts, auditors, operations management assistants, clerical assistants and others. Within DPI alone, there were eight grants accountants and specialists earning a combined $464,736 in 2015-’16, according to state records.
  • In sum, DPI is one of the most federalized departments in all of state government.  Outside of the University of Wisconsin System and the Wisconsin Department of Health Services, which administers Medicaid, DPI receives more federal dollars than any other area.

This raises questions about the amount of time and money spent on administration and bureaucracy rather than bettering the lives and minds of Wisconsin’s children. It raises questions, too, about the extent to which local school districts must follow the dictates of Washington, D.C., bureaucrats and their counterparts in Madison rather than the wishes of parents, teachers and local educators.

Our focus right now is on education. The growing influx and influence of federal dollars over education has already produced a mountain of federally required reports, audits, time sheets and other paperwork that few people ever see. And there seems to be little interest in measuring outcomes of that spending. If current policies and trends continue, the majority of employees at DPI will soon be working for the federal government.

Education reformers maintain hope that ESSA (the Every Student Succeeds Act) signed into law by President Barack Obama in December 2015 to replace the No Child Left Behind Act and scheduled to take effect in this fall, will return some control to the states, as intended by the law’s authors in Congress. Given that, we think the question of how DPI is structured and intermingled with the federal bureaucracy should be freshly examined. Ultimately, Wisconsin must take advantage of any new opportunity to redirect its focus to actually serving and educating children.

Our concerns, though, span much more than education.

Twenty years ago, there were 4,382 full-time equivalent employees in state government (not counting the UW System) paid with federal dollars, according to our budget review. Today, there are 4,987 — an increase of 14 percent that represents more than 600 positions and tens of millions of dollars of additional, annual spending.

The point: Grants-in-aid are anything but free. Deleterious impacts are, perhaps, most apparent at the federal level. The grants help drive up federal spending, federal taxes and long-term debt that, according to the Congressional Budget Office, will already amount to about 75% of gross domestic product — higher than any year since 1950.[iv]  In addition to hindering long-term national prosperity, the grants also divert Congress from essential national responsibilities to relative minutia that should be the exclusive concern of state and local governments.  

It is at the state level, however, where the proliferation of such grants have the most insidious and usually overlooked impact. Such grants subvert the judgments and priorities of local and state elected officials, who best know the needs of their community and the desires of their constituents, to those of a distant federal bureaucracy.

The people, it is clear, want you to govern. We think it is your obligation. And — at this juncture — your opportunity as well.

► WPRI's story on the federalization of Wisconsin DPI
► WPRI's press release

[i] James Madison, The Federalist No. 45, Constitution Society,

[ii] Office of Management and Budget, Historical Table 12.1,

[iii] Kasia Klimasinska, Deficit in U.S. narrows to five-year low on record revenue, Bloomberg Business,

[iv] Ian Hanchett, “CBO Director Predicts Unsustainable Debt, ‘Heightening the Risk of Fiscal Crisis,’” Breitbart,