Empowering Localities to Further a New Progressive Federalism

During the first Trump administration, states and localities were leaders in resisting the Trump agenda. State attorneys general in particular used their litigation muscle to stop and slow down odious policies such as the travel ban. Despite facing more hostile courts now, there is no doubt that states¹ and localities² are continuing to play an important role this time around.³ Some have taken the argument further and called on blue states to move beyond this resistance posture and engage in more constitutional hardball, as red states have done.⁴ Indeed, progressives have long neglected the crucial role of states and localities in governance and politics to their detriment, overlooking the true transformative potential of progressive federalism. 

The local level is where we have seen organized collectives of working people play a leading role in governing coalitions, whether through local labor unions, tenant unions, or community organizations. The policy outcomes of such governing coalitions have included universal pre-kindergarten, higher minimum wages, and robust sanctuary protections for immigrants, just to name a few. But the policy outcomes are not the most important part of this story. The quality and depth of democratic engagement at the local level via organized collectives of working people, such as Make the Road New York, the Chicago Teachers Union, Kansas City Tenants Union, and UNITE HERE Local 217 in New Haven, has the potential to remake our municipalities and reverse working class dealignment, the term political scientists use to describe the the trend of working-class people shifting toward the Right.⁵  

Localities, however, are significantly constrained both legally and fiscally in our system of federalism.

Fiscal Constraints: Tight Budgets

Local governments’ budgetary limitations stand in the way of meeting the demands of organized working people, whether that is the construction of affordable housing or the provision of excellent public education. To unlock the full potential of municipal co-governance, federal administrations must advance policies that tackle the insufficient and regressive mechanisms that local governments currently rely on for revenue and financing. Future administrations must also take on the weaponization and abuse of state preemption—the legal doctrine that allows a higher level of government to curtail the authority of a lower level of government to act on a particular issue—so that the power of local organizing can also be wielded in states governed by Republican trifectas. 

Relative to states and the federal government, local governments face significant external constraints when it comes to acquiring the resources to address challenges and meet the demands of their residents. For example, localities have historically faced limitations from state constitutions and long-standing statutes on their authority to use taxation to raise revenue.⁶ These limitations are intensifying as part of a growing trend of abusive state preemption, which will be discussed in more detail below. On the capital side of the budget, local governments are constrained by their reliance on the private municipal bond market, which shifts power away from democratically accountable elected officials and communities and instead to bankers, rating analysts, and bond attorneys.⁷ 

The lack of access to sufficient revenue and financing mechanisms undermines localities’ ability to do the essential things that allow working people to live and thrive, such as building affordable housing, providing fare-free transit, and adapting to the realities of climate change. The story of New York City in the 1940s through the 60s, for example, is a story of how additional revenue (in the form of federal funding during the 1930s) allowed labor and progressive movements to remake the city for working people.⁸ But the austerity that resulted from the 1970s fiscal crisis meant significant cuts in social services that continue to impact local governance today. Dreams of free higher education and affordable healthcare are not merely glimmers of a possible municipalist future but have been made real in the past.

Furthermore, these constraints have often led localities to turn to strategies that only exacerbate racial, spatial, and wealth inequality.⁹ Reliance on the private bond market and tax proceeds from commercial real estate has meant that cities are incentivized to build amenity-driven projects that attract and serve wealthier residents at the expense of working families.¹⁰ Local governments have often relied on regressive fines and fees to generate revenue, which, in the case of Ferguson, Missouri, has resulted in the tragic overpolicing of Black residents. This inequality is not only aggravated within cities, but between them; for example, Jackson, Mississippi’s junk bond rating from Moody’s costs the city additional millions of dollars annually in debt service, and thus the state is unable to update its water and sewer system to provide consistently clean water for its residents.¹¹

The federal government has an immense opportunity to unlock the potential of local communities and restore faith in government by lending directly to local (and state) governments. As part of the CARES Act in response to the COVID-19 pandemic, the Federal Reserve set up such a municipal liquidity facility,¹² although with onerous terms.¹³ It is time to ditch the terms and make such a facility permanent. And it is little-known history that the federal government used to share revenue directly with localities¹⁴—like in many other countries¹⁵—before budget cuts under Ronald Reagan made them a thing of the past. Part of Richard Nixon’s federalism initiative, the State and Local Fiscal Assistance Act of 1972 enabled the federal government to provide direct grants to state and local governments by formula with few regulatory restrictions.¹⁶ Reviving these kinds of direct federal government transfers to local governments would transform the terrain of municipal possibility. 

Legal Constraints: Abusive Preemption 

In the past decade plus, right-wing state legislatures have increasingly used state preemption to prohibit local governments from enacting progressive policies. For example, in 2015, the city council of Birmingham, Alabama, passed an ordinance that raised the local minimum wage, responding to a coalition of fast-food workers, faith communities, and civil rights organizations that formed around this fight. The state legislature swifty preempted Birmingham’s action a few months later. What started out as primarily an effort to quash the Fight for 15, abusive state preemption has evolved into a strangling of local authority on nearly all issues. Some of these new state laws actually punish cities by imposing additional liability or withholding funds.¹⁷ And the sheer quantity and pervasiveness of recent state preemption laws severely curtail the operational autonomy of local governments. These antidemocratic measures prevent local governments from sharing the prosperity of metropolitan economic growth with working families and the poor, and in many places is part of a long history of suppressing the voices of Black voters.¹⁸ 

Future federal administrations should leverage the powers of the robust administrative state to empower local governments in hostile state contexts. They should appoint a White House Special Assistant on State and Local Democracy who would be charged with facilitating interagency coordination, and task agency intergovernmental affairs officers with engaging directly with local governments in hostile states to generate creative solutions in the face of state preemption. Future administrations should consider using the authorities and capabilities of the US Department of Justice to investigate abusive preemption¹⁹ and state takeover²⁰ as potential civil rights violations and bring cases accordingly. And Congress should also consider ways to empower localities in hostile states—for example, by conditioning grants to states on lifting preemption in a certain issue area. 

Conclusion

At a time when democracy is threatened and trust in government appears to be at an all-time low, organized working people across the country are showing us the possibilities for governance at the local level. The next time progressives have the chance at the federal government, we must enact policies that allow these movements to realize their full democratic potential. In bad times, they can be the defenders of our struggling democracy, and in good they can be the seeds of the progressive multiracial democracy we are struggling to construct at the national level.