An interstate compact is a legally binding agreement between two or more states. Similar to a contract, a compact establishes a formal, legal relationship among states to address common problems or promote a common agenda.

Compacts are versatile policy tools that can be leveraged for any issue where states have a need to coordinate. For example, existing compacts are used to reduce burdens for military families in transition, solve boundary disputes, manage shared natural resources and build resilience to natural disasters.

There are over 250 active compacts in the U.S., and on average states are members of about 25.

State entrance into a compact requires passage from the state’s legislature and the governor signing model legislation containing compact language. The authorizing language in each state’s compact legislation must be the same for the compact to be enforceable.

For compacts to function, at least two states must enter the agreement. Some compacts may be regionally focused and only have a few member states, while other compacts may include every U.S. state and even some territories. Compacts may require a certain threshold of member states to be operational.

Compacts are powerful, durable and adaptive tools for promoting and ensuring cooperative action among states. Compacts:

• Provide state-developed solutions to shared and complex public policy
• Settle interstate disputes
• Respond to national priorities in consultation or partnership with the federal
• Help states maintain sovereignty in matters traditionally reserved for the states in place of federal inaction or inflexible and unfunded
• Create economies of scale to reduce administrative costs
• Address regional issues that affect multiple states
• Prevent the need for a state to act unilaterally

Compacts do not change a state’s governing authority within its own borders. Compacts promote shared sovereignty among compact member states through agreed upon rules that apply only to a specific policy area.

The interstate compact system is a constitutionally authorized means of implementing and protecting federalism and the role of states in the federal system.

The U.S. Constitution (Art. 1, Sec. 10, Clause 3) grants states the right to enter into multistate agreements for their common benefit. Congress must approve any compact that would increase state political power in a manner that would encroach upon federal authority. Approximately 40% of existing compacts required federal consent.

When entering a compact, states must adhere to state constitutional requirements. In 1951, the U.S. Supreme Court affirmed in West Virginia v. Sims that states have the authority to enter compacts and delegate authority to an interstate agency.

Compacts establish uniform guidelines, standards and procedures for agencies in compact member states.

Compacts are governed across states by a statutorily-created administrative entity (such as an interstate commission) as authorized by member states through the terms of the compact. Compact commissions address issues related to the compact more effectively than a state agency acting independently or when no state has the authority to act unilaterally.

Each member state typically appoints one or more delegates to the interstate commission. The delegates from each state serve as the compact administrators. Compacts are controlled by member states.

1. Development – Through a deliberative process, stakeholder groups examine issues, current state policies, best practices and alternative structures. Compact language is drafted based on recommendations from the stakeholder groups.

2. Education and Enactment – Once the compact language is finalized, states individually consider the compact through the legislative process, supported by educational and technical assistance from organizations such as The Council of State Governments (CSG) National Center for Interstate Compacts.

3. Transition and Operation – After the necessary number of states have enacted compact legislation, a compact commission is created to administer the compact.

Because compacts incorporate many stakeholders in the development process, need state legislative approval and require the establishment of an interstate commission, the entire process may take several years for the provisions of the compact to take effect. However, once compacts become operational, they remain durable and adaptable tools for the benefit of states.

Compacts require funding for development and administration. Seed funding may include grants from the federal government, sponsorship from private associations or direct allocations from states. The administration of compacts may likewise be funded from these resources as well as revenue-generating operations of the compacts, such as fees for services to compact beneficiaries.