Issue.  Does the Federal Government have the power to regulate what would be a state issue through Congress's power under the Spending Clause?

Background.  Congress had enacted a law that directed the Secretary of Transportation to withhold a percentage of federal highway funds to states that permitted the sale of alcohol to individuals under the age of 21.  South Dakota had a law that allowed for the sale of beer to individuals 19 years and older.  South Dakota sued that the Congressional act violates the constitutional limitations on congressional exercise of its spending powers.  Simply, the Federal Government does not have Constitutional authority to set a national minimum drinking age so it cannot do so through its powers to spend money.  The Supreme Court found that Congress's law was a constitutionally valid use of its powers.

Court's Analysis.  The Supreme Court analyzed precedent and recognized that the Court has recognized Congress's power to provide for the general Welfare, including the power to attach conditions on the receipt of federal funds even if those conditions are not with Congress's Article I powers.

However, Congress's power under the Spending Clause is not unlimited, but is subject to several restrictions.  The Court then articulated these restrictions.  First, the condition must be in pursuit of "the general Welfare".  The Courts should give great deference to Congress whether something is for the general Welfare.  Second, the condition Congress imposes on the receipt of funds must be unambiguous so States can knowingly decide whether to accept the funds.  Third, the condition must be related to the federal interest in the particular national project or program being funded.  Finally, other constitutional provisions may provide an independent bar to the conditional grant of federal funds.

South Dakota did not content that the first three restrictions were applicable in this case.  Instead, South Dakota contended that there was an "independent constitutional bar" to the condition.  The Court rejected South Dakota's 21st Amendment argument that only states could regulate the sale of alcohol.  The Court also address the 10th Amendment argument that this condition wsa an indirect route for Congress to legislate where they lacked power.  The Court rejected that argument and found the "independent constitutional bar" to mean Congress cannot impose conditions that would induce states to engage in unconstitutional activities - such as a condition that would force states to engage in discriminatory conduct.

Finally, the Court notes that the financial inducment for Congress may be so coercive that states will have no choice but to accept the funds and the condition.  The Court found that this no such situation since South Dakota would only lose 5% of the funds available to it had it not raised its drinking age.  This was only a mild encouragement.

My Analysis.  It is tricky when the Federal Government puts conditions on giving money to states.  But, at the same time, states don't have to take the money.  That is why the decision is correct.  You don't want the condition, then don't take the money.  As long as the condition is related to the spending then it is fine.