A January 2017 executive order that could render certain state and local governments ineligible to receive federal grants has generated interest in the federal government's power to condition funding on recipients taking or refraining from certain actions. The Spending Clause

While Congress would generally not be permitted to compel state legislators or executive officials to enforce or administer a federal regulatory program, it could provide federal grants to encourage states to participate in a federal program. Providing federal funds to nonfederal entities has been seen to constitute an exercise of one of Congress's enumerated powers, namely, its power under the Spending Clause of the Constitution (Article I, Section 8, Clause 1). Limitations on the Spending Power

Although Congress's power under the Spending Clause is expansive, the Supreme Court articulated certain limitations on the use of federal grant conditions in its 1987 decision in South Dakota v. Dole —which arguably remains the leading decision regarding the use of the federal government's conditional spending power—and in subsequent cases. In particular, these limitations require that any conditions attached to the receipt of federal funds must: 
1. be unambiguously established so that recipients can knowingly accept or reject them; 2. be germane to the federal interest in the particular national projects or programs to which the money is directed; 3. not violate a separate constitutional provision, such as the First Amendment or the Due Process or Takings Clauses of the Fifth Amendment; and 4. not cross the line from enticement to coercion, such that states have no real choice but to accept the funding and enact or administer a federal program. Coercive Conditions That Intrude on a State's Sovereignty

The fourth and final limitation that the Supreme Court has articulated as to the spending power is that any conditions imposed on the use of federal funds must comport with the basic principles of federalism as embodied in the Tenth Amendment. Executive Order 13768

The issuance of President Trump's January 25, 2017, executive order that could render "sanctuary jurisdictions" ineligible for federal grants has prompted renewed interest in the federal government's legal authority to impose conditions on federal funds. Some of these questions may be considered by the federal courts, as several jurisdictions have already filed lawsuits against the President and his senior officials, challenging the EO's constitutionality and seeking an injunction barring its implementation. Collectively, these lawsuits argue, among other things, that the EO violates: (1) the Spending Clause of the U.S. Constitution by imposing funding conditions that are unduly coercive or that are not related to the federal interest furthered by the funds; and (2) the Tenth Amendment prohibition against the federal government "commandeering" state and local governments by compelling them to enforce federal immigration law.
Commonly known as the Spending Clause, Article I, Section 8, Clause 1 of the U.S. Constitution has been widely recognized as providing the federal government with the legal authority to offer federal grant funds to states and localities that are contingent on the recipients engaging in, or refraining from, certain activities. However, the Supreme Court has articulated certain limitations on the exercise of this power. In its 1987 decision in South Dakota v. Dole, which arguably remains the leading case regarding the use of the federal government's conditional spending power, the Court held that legislation enacted pursuant to the Spending Clause must be in pursuit of the "general welfare." In addition, the Dole Court held that any conditions attached to the receipt of federal funds must: (1) be unambiguously established so that recipients can knowingly accept or reject them; (2) be germane to the federal interest in the particular national projects or programs to which the money is directed; (3) not violate other provisions of the Constitution, such as the First Amendment or the Due Process or Takings Clauses of the Fifth Amendment; and (4) not cross the line from enticement to impermissible coercion, such that states have no real choice but to accept the funding and enact or administer a federal regulatory program. The fourth of these criteria, in particular, is intended to ensure that any conditions on federal grant funds do not run afoul of the Tenth Amendment's prohibition on the federal government's "commandeering" of state or local governments or officials by requiring them to carry out federal programs.
The power of the federal government to attach conditions to federal grants has received renewed attention due to a January 2017 executive order issued by President Trump that is intended to encourage state and local cooperation with federal immigration enforcement by withholding federal grants to nonfederal entities that have adopted "sanctuary" policies. Several jurisdictions that could be affected by the executive order have filed suit against the President and his senior officials challenging the order's constitutionality and seeking an injunction that would bar its implementation. The plaintiffs argue, among other things, that the executive order: (1) does not comport with the restrictions on the spending power that were articulated by the High Court in Dole, and (2) violates the Tenth Amendment by compelling states and localities to enforce federal immigration law. This litigation regarding the executive order, and other legal challenges that may be filed in the future, could provide an opportunity for the federal courts to elaborate further on the federal government's power to impose conditions on the use of federal funds.