NFIB v. Sebelius, Coercion, and the Unconstitutional Conditions Doctrine

• August 6, 2012 • 8:38 am

In NFIB v. Sebelius, the Supreme Court held that the Affordable Care Act would be unconstitutional if interpreted to condition the entirety of a state’s Medicaid funding on its decision whether to accept the Act’s expansion of Medicaid services.  The Court, through Chief Justice Roberts, explained that such a condition would impermissibly coerce the states and therefore exceed Congress’s power to spend the federal fisc on behalf of the general welfare.  In so holding, the Court distinguished its leading precedent in this area, South Dakota v. Dole, on the grounds that there the only funding at issue was a small percentage of federal highway funds, whereas here a substantial portion of the states’ budgets would be threatened.  The Court managed to uphold the Act by interpreting it as conditioning the receipt of new funds only on acquiescence to the Medicaid expansion.

Shortly after NFIB was decided, commentators noted that its coercion analysis might endanger other federal programs, such as the Clean Air Act.  Recently, attorneys for the State of Texas filed a notice of supplemental authority in a consolidated action in the D.C. Circuit Court of Appeals relying on NFIB to support its case.  The lawsuit challenges the Environmental Protection Agency’s decision to require the states to incorporate greenhouse gas limitations in their “state implementation plans.”  Under the Clean Air Act, a permit is required for the construction of, or significant improvements to, “major” emitting facilities, i.e., projects that will emit large amounts of air pollutants regulated under the Act.  Generally, these permits are issued by states pursuant to a state implementation plan that EPA has previously approved.  The trouble here is that EPA has required the states to update their plans to include permitting provisions for the reduction of greenhouse gas emissions, and several states, supported by industry, have balked.  Now, lawyers for Texas are arguing that NFIB’s coercion discussion supports Texas’s position that EPA cannot invalidate the state’s implementation plan and thereby preclude it from issuing permits.

I am not a Clean Air Act expert, but I see a significant problem with Texas’s use of NFIB The coercion rationale is basically an application of the Unconstitutional Conditions doctrine, applied to the states.  That doctrine holds that the government cannot condition a benefit or permit on the recipient’s forfeiture of a constitutional right.  In other words, the government vis-à-vis the people cannot do indirectly what it is forbidden to do directly.  In the coercion context, the Court in NFIB affirmed that Congress cannot achieve indirectly through its spending clause power what it has no power to do directly.  (Congress cannot “commandeer” state legislatures and force them to expand Medicaid, so by the same token Congress cannot achieve Medicaid expansion by offering the states a financial carrot that they cannot refuse).  The difficulty I see is that, unless Texas is prepared to argue that Congress has no authority under the Constitution to regulate private activity that results in the emission of significant quantities of greenhouse gases, then NFIB doesn’t help its cause.  By failing to amend its implementation plan, Texas loses the ability to approve certain construction permits.  That may well be such an odious result that the state may feel coerced to amend its implementation plan per EPA’s instructions.  But under NFIB, coercion per se is not of constitutional moment, so long as the federal government could directly regulate.  In other words, if Congress could constitutionally set up a federal air emission permit scheme (which is of course the assumption underlying the Clean Air Act), then there is no constitutional objection to allowing the states to fill that role subject to federal oversight, and to take back that permitting authority when the state doesn’t wish to comply.  (Again, it would be a different question if the Clean Air Act compelled the states to administer the federal permitting program).

I should note, however, that there may be an NFIB-coercion argument here.  For example, the Clean Air Act empowers EPA to impose “sanctions” on a state that doesn’t appropriately update its implementation plan, and those sanctions include loss of federal transportation funds.  Depending on the amount of those funds and their importance to a state budget, such a condition could amount to financial coercion akin to that imposed by the Affordable Care Act.