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Tuesday, April 19, 2011

Block Grants: Perspectives and Controversies

Robert Jay Dilger
Senior Specialist in American National Government

Eugene Boyd
Analyst in Federalism and Economic Development Policy

Block grants are a form of grant-in-aid that the federal government uses to provide state and local governments a specified amount of funding to assist them in addressing broad purposes, such as community development, social services, public health, or law enforcement.

Block grant advocates argue that block grants increase government efficiency and program effectiveness by redistributing power and accountability through decentralization and partial devolution of decision-making authority from the federal government to state and local governments. Advocates also view them as a means to reduce the federal deficit. For example, on April 5, 2011, Representative Paul Ryan, chair of the House Committee on the Budget, recommended that the federal share of Medicaid be converted into a block grant “tailored to meet each state’s needs” as a means to “improve the health-care safety net for low-income Americans” and to “save $750 billion over 10 years.”

Block grant critics argue that block grants can undermine the achievement of national objectives and can be used as a “backdoor” means to reduce government spending on domestic issues. They also argue that the decentralized nature of block grants make it difficult to measure block grant performance and to hold state and local government officials accountable for their decisions.

Block grants, which have been a part of the American federal system since 1966, are one of three general types of grants-in-aid programs: categorical grants, block grants and general revenue sharing. These grants differ along three dimensions: the range of federal control over who receives the grant, the range of recipient discretion concerning aided activities, and the type, number, detail, and scope of grant program conditions.

Categorical grants can be used only for a specifically aided program, usually are limited to narrowly defined activities, and legislation generally details the program’s parameters and specifies the types of funded activities. There are four types of categorical grants: project categorical grants, formula-project categorical grants, formula categorical grants, and open-end reimbursement categorical grants.

Project categorical grants and general revenue sharing represent the ends of a continuum on the three dimensions differentiating grant types, with block grants being at the mid-point. However, there is some overlap among grant types in the middle of the continuum. For example, some block grants have characteristics normally associated with formula categorical grants. This overlap, and the variation in characteristics among block grants, helps to explain why there is some disagreement concerning precisely what is a block grant, and how many of them exist.

This report provides an overview of the six grant types, provides criteria for defining a block grant and uses that criteria to provide a list of current block grants, examines competing perspectives concerning the use of block grants versus other grant mechanisms to achieve national goals, provides an historical overview of the role of block grants in American federalism, and examines recent changes to existing block grants and proposals to create new ones.

Date of Report: April 5, 2011
Number of Pages: 22
Order Number: R40486
Price: $29.95

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