A block grant is a
grant-in-aid
A grant-in-aid is money coming from a central government for a specific project. Such funding is usually used when the government and the legislature decide that the recipient should be publicly funded but operate with reasonable independence ...
of a specified amount from a larger government to a smaller regional government body. Block grants have less oversight from the larger government and provide flexibility to each subsidiary government body in terms of designing and implementing programs.
Block grants,
categorical grant
Categorical grants, also called conditional grants, are grants issued by the United States Congress which may be spent only for narrowly defined purposes. They are the main source of federal aid to state and local governments and can be used onl ...
s, and
general revenue sharing are three types of federal government grants-in-aid programs.
[A block grant differs from a ]categorical grant
Categorical grants, also called conditional grants, are grants issued by the United States Congress which may be spent only for narrowly defined purposes. They are the main source of federal aid to state and local governments and can be used onl ...
, in that the latter has stricter and more specific provisions on the how it is to be spent.
Graphical representation
![Impact_of_Block_Grant_on_Budget_Constraint](https://upload.wikimedia.org/wikipedia/commons/2/2e/Impact_of_Block_Grant_on_Budget_Constraint.png)
The figure demonstrates the impact of an education block grant on a town's budget constraint. According to microeconomic theory, the grant shifts the town's budget constraint outwards, enabling the town to spend more on both education and other goods, due to the
income effect. While this increases the town's utility, it does not maximize the town's spending on education. Therefore, if the goal of a grant program is to encourage spending on a particular good, a categorical grant may be more effective in achieving this goal than a block grant, as most block grant critics would argue.
By country
United States
A block grant in the United States is a
grant-in-aid
A grant-in-aid is money coming from a central government for a specific project. Such funding is usually used when the government and the legislature decide that the recipient should be publicly funded but operate with reasonable independence ...
of a specified amount from the
federal government of the United States
The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States, a federal republic located primarily in North America, composed of 50 states, a city within a fede ...
to individual states and local governments to help support various broad purpose programs, such as law enforcement, social services, public health, and community development.
Through a block grant program for
Medicaid
Medicaid in the United States is a federal and state program that helps with healthcare costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and pers ...
,
for example, each state would receive a set amount of money from the federal government.
The block grants can be set based on "per capita" or on the needs of the state.
Each state has to fill any funding gap if there is a difference between their spending and the amount set by the federal government.
Block grants are the topic of debate in the United States. According to the 2014
Congressional Research Service
The Congressional Research Service (CRS) is a public policy research institute of the United States Congress. Operating within the Library of Congress, it works primarily and directly for members of Congress and their committees and staff on a c ...
(CRS) advocates, who would like to see Medicaid converted into a block grant, say that block grants assist in reducing the federal deficit, increase government efficiency, redistribute power, improve accountability, and allow for flexibility.
Critics, who are specifically against converting Medicaid into block grants, say that block grant "undermine the achievement of national objectives", "reduce government spending on domestic issues" where, for example, the "most vulnerable seniors, individuals with disabilities, and low-income children" would lose their health care through deep cuts in Medicaid.
Critics also say that because block grants are decentralized, it is more challenging to "measure block grant performance and to hold state and local government officials accountable for their decisions".
In February 2017, the national debate in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
regarding the effectiveness of block grants intensified as the
United States Congress
The United States Congress is the legislature of the federal government of the United States. It is bicameral, composed of a lower body, the House of Representatives, and an upper body, the Senate. It meets in the U.S. Capitol in Washing ...
decided whether to convert
Medicaid
Medicaid in the United States is a federal and state program that helps with healthcare costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and pers ...
to a block grant program.
According to a January 11, 2019 ''
Politico
''Politico'' (stylized in all caps), known originally as ''The Politico'', is an American, German-owned political journalism newspaper company based in Arlington County, Virginia, that covers politics and policy in the United States and intern ...
'' article, the
Trump Administration
Donald Trump's tenure as the List of presidents of the United States, 45th president of the United States began with Inauguration of Donald Trump, his inauguration on January 20, 2017, and ended on January 20, 2021. Trump, a Republican Party ...
was creating new guidelines to overhaul Medicaid in order to reduce health care costs for the poor through block grants, bypassing Congress.
According to the same article,
Centers for Medicare and Medicaid Services
The Centers for Medicare & Medicaid Services (CMS), is a federal agency within the United States Department of Health and Human Services (HHS) that administers the Medicare program and works in partnership with state governments to administer M ...
(CMS) Administrator
Seema Verma
Seema Verma (born September 26, 1970) is an American health policy consultant and former administrator of the Centers for Medicare & Medicaid Services in the Donald Trump administration. During her tenure, she was involved in efforts to repeal ...
had mentioned using CMS' authority to "pursue block grants during a meeting with state Medicaid directors in the fall" of 2018. Verma promotes block grants but she has "faced heavy scrutiny" from CMS lawyers in her attempts to "insert block grant language into federal guidance."
Background
The 2014
Congressional Research Service
The Congressional Research Service (CRS) is a public policy research institute of the United States Congress. Operating within the Library of Congress, it works primarily and directly for members of Congress and their committees and staff on a c ...
(CRS) report says the first true block grant was in 1966.
In 1949, first
Hoover Commission
The Hoover Commission, officially named the Commission on Organization of the Executive Branch of the Government, was a body appointed by President Harry S. Truman in 1947 to recommend administrative changes in the Federal Government of the Unite ...
'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."
The
Eisenhower Administration
Dwight D. Eisenhower's tenure as the 34th president of the United States began with his first inauguration on January 20, 1953, and ended on January 20, 1961. Eisenhower, a Republican from Kansas, took office following a landslide victory ov ...
(1953–1961) created "block grants in the health and public welfare fields".
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.
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."
In the late 1960s, with both Congress and the White House under control of the
Democratic Party Democratic Party most often refers to:
*Democratic Party (United States)
Democratic Party and similar terms may also refer to:
Active parties Africa
*Botswana Democratic Party
*Democratic Party of Equatorial Guinea
*Gabonese Democratic Party
*Demo ...
, Congress enacted the 1966 Partnership for Health Act and the 1968 Omnibus Crime Control and Safe Streets Act of 1968 (Safe Streets Act).
In a March 16, 2017 ''
New England Journal of Medicine
''The New England Journal of Medicine'' (''NEJM'') is a weekly medical journal published by the Massachusetts Medical Society. It is among the most prestigious peer-reviewed medical journals as well as the oldest continuously published one.
Hist ...
'' 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.
[There was a cap on the amount of money available, which is similar to the block grants proposed by the Republicans in 2017. Se]
Carroll (2107)
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.
[Compared to 81 million in 2017. Se]
/ref> According to an October 1977 U.S. Advisory Commission on Intergovernmental Relations The U.S. Advisory Commission on Intergovernmental Relations (ACIR) was an independent, bipartisan agency in the United States federal government formed to study and consider the federal government's intergovernmental relationships. It was establishe ...
report, local government officials compared to federal government officials are "closer to the people" and therefore better able to identify local needs. 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.
During the Nixon Administration
Richard Nixon's tenure as the List of presidents of the United States, 37th president of the United States began with First inauguration of Richard Nixon, his first inauguration on January 20, 1969, and ended when he resigned on August 9, 1974 ...
(1969–1974) a new strategy, called " special revenue sharing" was developed and implemented from 1972 to 1986, to replace block grants. Through revenue sharing, the United States Congress
The United States Congress is the legislature of the federal government of the United States. It is bicameral, composed of a lower body, the House of Representatives, and an upper body, the Senate. It meets in the U.S. Capitol in Washing ...
appropriated federal tax revenue
Tax revenue is the income that is collected by governments through taxation. Taxation is the primary source of government revenue. Revenue may be extracted from sources such as individuals, public enterprises, trade, royalties on natural resou ...
to share with states, cities
A city is a human settlement of notable size.Goodall, B. (1987) ''The Penguin Dictionary of Human Geography''. London: Penguin.Kuper, A. and Kuper, J., eds (1996) ''The Social Science Encyclopedia''. 2nd edition. London: Routledge. It can be def ...
, counties
A county is a geographic region of a country used for administrative or other purposesChambers Dictionary, L. Brookes (ed.), 2005, Chambers Harrap Publishers Ltd, Edinburgh in certain modern nations. The term is derived from the Old French ...
and townships
A township is a kind of human settlement or administrative subdivision, with its meaning varying in different countries.
Although the term is occasionally associated with an urban area, that tends to be an exception to the rule. In Australia, Ca ...
. According to ''The New York Times
''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'', in FY 1986 the year before revenue sharing was eliminated by the Reagan administration
Ronald Reagan's tenure as the 40th president of the United States began with his first inauguration on January 20, 1981, and ended on January 20, 1989. Reagan, a Republican from California, took office following a landslide victory over D ...
, the federal government "distributed $4.5 billion to 39,000 municipalities".['']The New York Times
''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'' reported on January 31, 1987, that "The elimination of the program of general revenue sharing on September 30, 1986 after several years of significant cuts in other Federal aid, has prompted layoffs, curtailment of police protection and other services, and higher taxes and user fees in thousands of counties, cities and villages."
Revenue sharing lost federal support under Reagan and was replaced by block grants in smaller amounts in 1987. The 1981 Community Services Block Grant
The Community Services Block Grant (CSBG) provides federal funding for Community Action Agencies (CAAs) and other programs that seek to address poverty at the community level. Like other block grants, CSBG funds are allocated to the states and oth ...
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. According to the General Accounting Office
The U.S. Government Accountability Office (GAO) is a legislative branch government agency that provides auditing, evaluative, and investigative services for the United States Congress. It is the supreme audit institution of the federal govern ...
, 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. In 1996, Congress "replaced Aid to Families with Dependent Children
Aid to Families with Dependent Children (AFDC) was a federal assistance program in the United States in effect from 1935 to 1997, created by the Social Security Act (SSA) and administered by the United States Department of Health and Human Serv ...
with the Temporary Assistance for Needy Families
Temporary Assistance for Needy Families (TANF ) is a federal assistance program of the United States. It began on July 1, 1997, and succeeded the Aid to Families with Dependent Children (AFDC) program, providing cash assistance to indigent Ame ...
(TANF) block grant". 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.
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.
In 2003, under the state Homeland Security Grant Program
Homeland Security Grant Program (HSGP) is a program in the United States established in 2003 and was designated to incorporate all projects that provide funding to local, state, and Federal government agencies by the Department of Homeland Securit ...
and Critical Infrastructure Protection
Critical infrastructure protection (CIP) is a concept that relates to the preparedness and response to serious incidents that involve the critical infrastructure of a region or nation.
The American Presidential directive PDD-63 of May 1998 set up ...
, the least populous state, Wyoming
Wyoming () is a U.S. state, state in the Mountain states, Mountain West subregion of the Western United States. It is bordered by Montana to the north and northwest, South Dakota and Nebraska to the east, Idaho to the west, Utah to the south ...
received $17.5 million and the most populous state, California
California is a U.S. state, state in the Western United States, located along the West Coast of the United States, Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the List of states and territori ...
, 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. 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. 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.
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.
In 2009, Carl Stenberg wrote that block grants "could contribute a greater degree of flexibility to the intergovernmental system, but their potential asoften 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.
According to a 2013 Center for American Progress
The Center for American Progress (CAP) is a public policy research and advocacy organization which presents a liberal viewpoint on economic and social issues. It has its headquarters in Washington, D.C.
The president and chief executive officer ...
, from 2008 through 2013, categorical grant funding decreased for 29 out of 50 states as did block grants.
According to a 2009 U.S. Office of Management and Budget
The Office of Management and Budget (OMB) is the largest office within the Executive Office of the President of the United States (EOP). OMB's most prominent function is to produce the president's budget, but it also examines agency programs, pol ...
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. 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.
A 2014 Congressional Research Service
The Congressional Research Service (CRS) is a public policy research institute of the United States Congress. Operating within the Library of Congress, it works primarily and directly for members of Congress and their committees and staff on a c ...
(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." 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.
According to a June 2015 Center on Budget and Policy Priorities
The Center on Budget and Policy Priorities (CBPP) is a progressive American think tank that analyzes the impact of federal and state government budget policies. A 501(c)(3) nonprofit organization, the Center's stated mission is to "conduct resear ...
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.
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."
Denmark
Greenland receives a block grant from Denmark. The block grant equals about two-thirds of Greenland's government budget or about one-quarter of the entire GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
of Greenland. Economic stability is seen as a basis for full political independence
Independence is a condition of a person, nation, country, or state in which residents and population, or some portion thereof, exercise self-government, and usually sovereignty, over its territory. The opposite of independence is the ...
from Denmark. When Kim Kielsen
Kim Kielsen (born 30 November 1966) is a Greenlandic politician, who served as leader of the Siumut party and sixth prime minister of Greenland between 2014 and 2021.
Careers Past careers
Kielsen was originally a mariner, and then a police office ...
was reelected with a strong majority as the leader of the largest Greenlandic pro-independence party Siumut
Siumut (, ) is a political party in Greenland in the social democratic tradition. Since the establishment of home rule in 1979, it has been the dominant party in Greenland. Siumut is led by Erik Jensen, who beat the then-incumbent Prime Ministe ...
in 2017, observers considered it a win for the "slow-independence" faction instead of the "now-independence" faction. (His opponent, Vittus Qujaukitsoq
Vittus Qujaukitsoq (born October 5, 1971 in Qaanaaq, Greenland, Kingdom of Denmark) is a Greenlandic politician. Qujaukitsoq was appointed as Minister of Finance and Interior of Aleqa Hammond cabinet from May 2013 to November 2014. After Novembe ...
, had argued for independence even if it meant losing the large annual block grant from the Danish state.) If Greenland were to become an independent country, the annual block grant from Denmark to Greenland would cease.
United Kingdom
Since devolution in the United Kingdom
In the United Kingdom, devolution is the Parliament of the United Kingdom's statutory granting of a greater level of self-government to the Scottish Parliament, the Senedd (Welsh Parliament), the Northern Ireland Assembly and the London Asse ...
was implemented in the late 1990s, creating the Scottish Parliament
The Scottish Parliament ( gd, Pàrlamaid na h-Alba ; sco, Scots Pairlament) is the devolved, unicameral legislature of Scotland. Located in the Holyrood area of the capital city, Edinburgh, it is frequently referred to by the metonym Holyro ...
, Welsh Assembly
The Senedd (; ), officially known as the Welsh Parliament in English and () in Welsh, is the devolved, unicameral legislature of Wales. A democratically elected body, it makes laws for Wales, agrees certain taxes and scrutinises the Welsh Gove ...
and the Northern Ireland Assembly
sco-ulster, Norlin Airlan Assemblie
, legislature = 7th Northern Ireland Assembly, Seventh Assembly
, coa_pic = File:NI_Assembly.svg
, coa_res = 250px
, house_type = Unicameralism, Unicameral
, hou ...
, the devolved governments of Scotland
Scotland (, ) is a country that is part of the United Kingdom. Covering the northern third of the island of Great Britain, mainland Scotland has a border with England to the southeast and is otherwise surrounded by the Atlantic Ocean to the ...
, Wales
Wales ( cy, Cymru ) is a Countries of the United Kingdom, country that is part of the United Kingdom. It is bordered by England to the Wales–England border, east, the Irish Sea to the north and west, the Celtic Sea to the south west and the ...
and Northern Ireland
Northern Ireland ( ga, Tuaisceart Éireann ; sco, label= Ulster-Scots, Norlin Airlann) is a part of the United Kingdom, situated in the north-east of the island of Ireland, that is variously described as a country, province or region. Nort ...
have been funded by block grants from the government of the United Kingdom
ga, Rialtas a Shoilse gd, Riaghaltas a Mhòrachd
, image = HM Government logo.svg
, image_size = 220px
, image2 = Royal Coat of Arms of the United Kingdom (HM Government).svg
, image_size2 = 180px
, caption = Royal coat of arms of t ...
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 Greater 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 Planning gains (or planning obligations) are ways that local authorities in the United Kingdom can secure additional public benefits from developers, during the granting of planning permission.
Planning gains seek to capture some of the uplift in l ...
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 Scotland Act 2012 is an Act of the Parliament of the United Kingdom. It sets out amendments to the Scotland Act 1998, with the aim of devolving further powers to Scotland in accordance with the recommendations of the Calman Commission. It ...
, the block grant from the United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
government to Scotland will be cut, but the Scottish Government will be able to collect an equivalent amount of income tax
An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...
.
Netherlands
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. 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.
See also
* Categorical grant
Categorical grants, also called conditional grants, are grants issued by the United States Congress which may be spent only for narrowly defined purposes. They are the main source of federal aid to state and local governments and can be used onl ...
* New Federalism, a political tendency in the United States which favors block grants
Explanatory notes
References
{{DEFAULTSORT:Block grant
Devolution in the United Kingdom
Economy of the United States
Grants (money)