In the case of South Dakota v. Dole, Secretary of Transportation in 1986, the U.S. Supreme Court ruled that Congress could use federal funds to indirectly influence state law. The dispute arose when South Dakota challenged a federal law that withheld a percentage of federal highway funds from states where the legal drinking age was under 21 years old. South Dakota argued this violated their constitutional rights as it coerced them into raising their drinking age to comply with national standards set by Congress and enforced by then-Secretary of Transportation Elizabeth Dole. However, the court upheld that while Congress cannot force states to enact specific laws directly, they can create incentives for compliance through conditional spending programs like withholding highway funding. This ruling established an important precedent regarding congressional power over state legislation via fiscal means.

In the dissenting opinion for South Dakota v. Dole, Justice O'Connor argued that the federal government overstepped its constitutional boundaries by using financial incentives to influence state policy on drinking age laws. She contended that while Congress has broad powers under the Spending Clause of the Constitution, it does not have unlimited authority to impose conditions on states in exchange for federal funds. In her view, this case represented a clear instance where Congress was coercing states into adopting policies they otherwise would not adopt through conditional spending measures - an action she deemed unconstitutional as it violated principles of federalism and state sovereignty. Furthermore, she believed there was no logical connection between highway construction and maintenance funding (which is what was being offered) and setting a minimum drinking age at 21 years old.