Also known as: federal fund · fed funds
Written by attorneys · grounded in primary & secondary sources — see below
Money appropriated by Congress and disbursed through federal agencies to states, institutions, or private recipients for designated purposes. Congress may attach conditions to the receipt or use of the money provided the conditions are related to the federal interest in the funded program and do not independently violate the Constitution.
Congress creates a hotel-renovation grant program and conditions the funds on states prohibiting alcohol sales to guests under 21 in hotel minibars. The Lakeside State Tourism Board accepts the grants and enacts the required rule. A hospitality association challenges the condition as an improper regulation of alcohol. The court upholds the condition because it is germane to the federal tourism program and the state remains free to decline the money.
The Department of Health and Human Services awards family-planning grants to clinics on the condition that federal money not be used for abortion counseling or advocacy. A clinic that receives the funds instructs its staff to refer patients seeking abortion information to other providers. When the clinic challenges the restriction as compelled speech, the court sustains the condition because it applies only to the use of the federal funds within the funded program.
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Conditions must be related to the federal interest in the program, stated unambiguously, and not independently violate another constitutional provision. They also must not be so coercive that they effectively compel states to accept the funds.
Supporting sources
Yes. When the government funds a program to advance specific policy goals, it may define the program's scope and bar the use of those funds for disfavored speech, such as abortion counseling. The restriction is treated as government speech and does not violate the First Amendment if it applies only inside the funded program.
Supporting sources
No. The Twenty-First Amendment does not bar Congress from using its spending power to encourage states to adopt alcohol-related policies when the condition is related to the federal program. States remain free to decline the funds and retain their existing alcohol rules.
Supporting sources