Block grant (United States)

The 2014 Congressional Research Service (CRS) report says the first true block grant was in 1966.[1] In 1949, first Hoover Commission's 1949 report recommended the creation of "a system of grants" based "upon broad categories—such as highways, education, public assistance, and public health—as contrasted with the present system of extensive fragmentation."[6]^:3 The Eisenhower Administration (1953 – 1961) created "block grants in the health and public welfare fields".[6]^:3 In the 1950s, the U.S. Department of Health, Education, and Welfare (HEW) was able to consolidate "child health and welfare, vocational education, and vocational rehabilitation areas" into block grants for public health.[6]^:3 But most proposals for block grants repeatedly met rejection in the 1950s. Reasons included a political misalignment between federal and state levels, concerns about a lack or reduction of federal controls, and that giving states wider latitude in spending would be a "more effective and efficient use of public funds."[6]^:4

In the late 1960s, with both Congress and the White House under control of the Democratic Party, Congress enacted the 1966 Partnership for Health Act and the 1968 Omnibus Crime Control and Safe Streets Act of 1968 (Safe Streets Act).[6]^:4[7] In a March 16, 2017 New England Journal of Medicine article, the authors provided background on health care provisions for the poor in the 1950s and 1960s. Prior to the creation of Medicaid in 1965, health providers were reimbursed directly on a per-capita basis.[Notes 2] When the cap was spent, states were responsible for cutting health costs to make up the difference by restricting who, what and how much care one could access. As a result, only 3.4 million people in the US were able to access these benefits in the 1960s before Medicaid.[8][Notes 3][4][3] According to an October 1977 U.S. Advisory Commission on Intergovernmental Relations report, local government officials compared to federal government officials are "closer to the people" and therefore better able to identify local needs.[6]^:8–11 According to the ACIR report, advocates say block grants allow local governments to experiment with new approaches to solving various problems that other state and local officials can learn from. Such innovation would not be possible if funding were provided through restrictive categorical grants.[6]

During the Nixon Administration (1969 – 1974) a new strategy, called "special revenue sharing" was developed and implemented from 1972 to 1986, to replace block grants.[6]^:4 Through revenue sharing, the United States Congress appropriated federal tax revenue to share with states, cities, counties and townships. According to The New York Times, in FY 1986 the year before revenue sharing was eliminated by the Reagan administration, the federal government "distributed $4.5 billion to 39,000 municipalities".[9][Notes 4]

Revenue sharing lost federal support under Reagan and was replaced by block grants in smaller amounts in 1987.[9] The 1981 Community Services Block Grant under President Reagan consolidated 77 existing anti-poverty grants into nine new block grants with a budget representing c.25% less than the programs they replaced.[10][11] According to the General Accounting Office, from 1980 to 2001, the number of federal block grant programs went from 450 to 700. The grants were aimed at a wide range of activities from education to healthcare, transportation, housing and counterterrorism.

In 1996, HHS and education moved towards "nationalizing trends", there was an attempt made towards devolution of welfare policy.[12]^:7 In 1996, Congress "replaced Aid to Families with Dependent Children with the Temporary Assistance for Needy Families (TANF) block grant".[12]^:7 The Advisory Commission on Intergovernmental Relations (ACIR), which provided federal intergovernmental expertise, "played an important role in the design and creation of a host of intergovernmental policy initiatives, including block grants. ACIR was eliminated in 1996.[12]^:4

According to a 2017 CBPP study, since 2000, funding for the 13 major low-income health, housing, and social services block grants has fallen by 37%, after adjusting for inflation and population growth. This sharp reduction in funding can be attributed to the basic structure of block grants. Since block grants are designed to give local governments broad flexibility over their use of federal funds, recipients can turn these grants into savings, or spend them on other matters. As a result, it is often difficult to track in detail how these funds are being used, and what greater impact they have, thus making block grants very vulnerable to funding reductions or freezes.[13]

In 2003, under the state Homeland Security Grant Program and Critical Infrastructure Protection, the least populous state, Wyoming received $17.5 million and the most populous state, California, received $164 million. In fiscal year 2004, Wyoming was guaranteed to receive at least $15 million, California $133 million. Wyoming thus received $35.3 per person, California only $4.7 per person. The formulas for how much money states receive favors small states. Most grant programs have a minimum amount per state, usually 0.5% or 0.75% of the total money given to states in the program. Similar patterns exist for other block grant formulas. An analysis exists in the book Sizing Up the Senate. Additionally, individual states may provide block grants to their political subdivisions, such as counties, towns, and school districts. Despite the various theoretical arguments in favor of block grants, existing research has mainly found that block grants are generally ineffective in achieving policy goals.

According to a 2004 book entitled Block Grants: Details of the Bush Proposals, critics of block grants argued that the flexibility block grant programs gave to local governments diminished the ability of federal administrators to evaluate the effectiveness of these programs, especially given that there were often no federal requirements for uniform program data collection across states.[2]^:9 Opponents also said that the lack of restriction regarding where local officials spend block grant funding would enable them to retarget resources away from communities with the greatest need, to communities with the greatest political influence.[1] Block grant critics said that the funding for block grants was prone to diminish over time because it was more difficult to regenerate political support for broad-purpose, state-run programs, than for categorical programs focusing on specific purposes.[2]^:4

The budget for FY 2005 under President Bush budget converted many federal programs into block grants to save $1.8 billion. Eighteen community development block grant programs were consolidated into one Commerce Department program.[14]

In 2009, Carl Stenberg wrote that block grants "could contribute a greater degree of flexibility to the intergovernmental system, but their potential [was] often overstated and difficult to realize." He said that there was no empirical evidence that block grants reduce administrative costs as these costs were transferred from the federal government to the recipient states.[15]^:263–286

According to a 2013 Center for American Progress, from 2008 through 2013, categorical grant funding decreased for 29 out of 50 states as did block grants.[16]

According to a 2009 U.S. Office of Management and Budget report, in 2008 block grants received the lowest average score based on the Program Assessment Rating Tool (PART), a set of questionnaires developed by the George W. Bush Administration to assess the efficacy of various federal funding programs.[17] Out of the seven PART program types in 2008, 30% of block grant programs were rated "results not demonstrated", and 5% were rated "ineffective". Block grant advocates said that PART's strong weighting of program results in its calculations make it a poor measure for evaluating block grant performance. While PART examines how programs achieve a single outcome, many block grant programs contain multiple outcomes which are often contradictory to each other, and thus the overall impact of block grants may be underestimated.[17]^:112

A 2014 Congressional Research Service (CRS) report entitled "Block Grants: Perspectives and Controversies" said that there were "21 funded block grants, totaling about $50.8 billion in FY2014" which represented "less than 10% of total federal grant-in-aid assistance."[1] The CRS report provided arguments for both side of the debate on the use of block grants. Those who support block grants, say that they were more cost-effective because they reduce federal administrative costs related to state and local government paperwork requirements.[1]

According to a June 2015 Center on Budget and Policy Priorities report, the amount of basic assistance that block grants provide has also fallen, as local governments spend their federal funds on other purposes. For example, in 2015, only half of the funds received from the TANF (Temporary Assistance for Needy Families) block grant were spent on core welfare reform activities such as cash assistance, work activities, and child care. The rest of the funds were spent on a variety of different matters unrelated to the program.[18]

The CBPP study said that, "Unlike block grants, entitlement programs such as Medicaid and SNAP are highly responsive to changes in need. They grow immediately and automatically when need rises. This growth is critically important during recessions...Programs like Medicaid and SNAP would lose this responsiveness if turned into block grants."[13]

Greenland receives a block grant from Denmark. The block grant equals about two-thirds of Greenland's government budget[20] or about one-quarter of the entire GDP of Greenland.[21] Economic stability is seen as a basis for full political independence from Denmark.[22] When Kim Kielsen was reelected with a strong majority as the leader of the largest Greenlandic pro-independence party Siumut in 2017, observers considered it a win for the "slow-independence" faction instead of the "now-independence" faction.[23] (His opponent, Vittus Qujaukitsoq, had argued for independence even if it meant losing the large annual block grant from the Danish state.)[24] If Greenland were to become an independent country, the annual block grant from Denmark to Greenland would cease.[25]

Since devolution in the United Kingdom was implemented in the late 1990s, creating the Scottish Parliament, Welsh Assembly and the Northern Ireland Assembly, the devolved governments of Scotland, Wales and Northern Ireland have been funded by block grants from the government of the United Kingdom because only a relatively small percentage of the tax revenue is collected by the devolved governments. Westminster provides a block grant for Transport for London reflecting the expense of operating the London Underground and the fact the London Authority is unable to raise a Transport Levy on Council Tax unlike other metropolitan counties in the UK (Though since 2012 the Mayor of London's Community Infrastructure Levy has been introduced allowing the Mayor to attach a levy on property development to serve a similar function).

Under the terms of the Scotland Act 2012, the block grant from the United Kingdom government to Scotland will be cut, but the Scottish Government will be able to collect an equivalent amount of income tax.[26]

On the other hand, there is limited research that suggests that block grants have a positive impact on policy outcomes. One study in the Netherlands evaluating the ADHA (Assistance in Daily Housekeeping Activities) block grant finds that for each additional euro of grant money given to local governments, 50 cents is spent on ADHA. Consequently, the authors argue that block grants can achieve important outcomes, and that categorical grants are not necessary to force spending on particular issues.[27] However, block grant critics would likely argue that this 50% spending rate on ADHA is a sign of ineffectiveness, as it means that local governments are spending the rest of the funding on unrelated issues.