Reagan-era regulations hold back good jobs policies in states and cities

In the complicated and consequential world of federal regulations, the rules issued by the Office of Management and Budget (OMB) are among the most intricate and important. One particularly significant set, the Uniform Guidance, attaches conditions to how every federally appropriated grant dollar is spent or contracted out by state and local governments

Massive recent federal investments in America’s built infrastructure and climate resilience under the Infrastructure Investment and Jobs Act (IIJA) mean that the Uniform Guidance will have an even greater impact on the trajectory of domestic policy over the coming years. Because so much federal spending is channeled through states and cities, grant standards contained in the Uniform Guidance can constrain—or empower—any imaginable state or local policy agenda that’s carried out with federal money.

Despite the historic opportunities available to state and local governments through the IIJA, states and cities are still hamstrung when it comes to using infrastructure funds to deliver good jobs and develop fairer, more vibrant local economies.

The culprit? The Uniform Guidance.

Where does the Uniform Guidance come from?

The Uniform Guidance’s history began during the Nixon administration, which in 1971 issued OMB Circular A-102, “Uniform Requirements for Assistance to State and Local Governments.” Aimed at improving consistency in the use of federal grants for state and local procurement, the circular set out guidelines to help federal agencies develop their own grant regulations.

For the Reagan administration, however, the regulatory guidelines did not go far enough. A 1986 memo from the administration’s director of OMB argued that “common grant regulations would further our Federalism and Regulatory Relief objectives” by devolving contracting authority to state and local governments and cutting down on administrative inefficiencies. In 1987, Reagan duly directed OMB to revise Circular A-102, establishing common grant management terms and conditions to be implemented verbatim by federal agencies.

Far from delegating policy power to states and cities, however, the Reagan-era revisions to the Uniform Guidance actually had more to do with telling them what they couldn’t do with federal money. In 1984, the New York City Council had passed Local Law 19, which created sanctions to steer public contracts away from businesses with financial interests in apartheid South Africa. The Department of Transportation threatened to withdraw federal funding for the City’s transportation projects, and a 1986 opinion from the Department of Justice’s Office of Legal Counsel (OLC) held that the law violated the “full and open competition” principle of the Federal Highways Statute.

This new interpretation of competition made it into the revised Circular A-102, and then into OMB regulations. It continues to curtail progressive state and city policies today.

What does current Uniform Guidance stop states and cities from doing?

A key policy objective for many states and cities is to use new infrastructure investments to support well-paid, long-term jobs for local residents. Although the IIJA doesn’t include any funding for the public workforce system, researchers from the Brookings Institution have identified 72 programs authorized by the law, worth about $490B in total, that allow workforce development activities. Six programs totaling $281M focus primarily on workforce training. While these important IIJA programs will encourage businesses to train and hire more workers, the Uniform Guidance prevents states and cities from creating grant requirements that channel the benefits of training and job creation to local residents.

Targeted hiring provisions elevate local residents, particularly those from marginalized communities, and have been used with success in construction jobs in San Francisco and for civil service jobs in Los Angeles, among others. States and cities should also be able to implement project labor agreements (PLAs)—deals between employers and unions that set labor and job quality standards—like the one agreed in 2019 for a major offshore wind energy project in Rhode Island, which has now been expanded in a national agreement. But without changes to the Uniform Guidance, most infrastructure projects funded under the IIJA can’t benefit from similar equity-building policies.

How do we fix it?

The competition standard enshrined in the Uniform Guidance doesn’t expressly permit states and cities to implement targeted hiring provisions or project labor agreements. Without these regulatory permissions, state and local recipients of federal funds must often resort to picking the lowest bidder over others with better plans for job quality and equity.

Several legal and administrative actions have improved state and local policy flexibility since the Reagan era, including a 2007 court decision upholding limited local hire provisions, an amended legal opinion from OLC in 2013, and a local hire pilot for Department of Transportation projects launched during the Obama administration. Most recently, a coalition led by Jobs to Move America (JMA) succeeded in eliminating a ban on local hire provisions in federally funded road, highway, and transit construction.

But there’s more work to be done. Roads and highways aren’t enough: state and city governments should be allowed to include targeted hire provisions and PLAs in all infrastructure investments, whether they target energy networks or climate resilience or water safety or broadband. JMA recently launched its Local Opportunities Campaign, a new effort to press reforms to the Uniform Guidance. At the Center on Education & Labor, we’re proud to add our voice to their call for straightforward federal reforms that let states and cities support fair and resilient local job markets while they build and repair their infrastructure.

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