Department of Health and Human Services 
OFFICE  OF  I 
INSPECTOR  GENERAL 
FEDERAL  APPROACHES  TO  FUNDING 
PUBLIC  HEALTH  PROGRAMS  OFFICE  OF INSPECTOR  GENERAL 
The mission of the OffIce of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrityof the Departmentof Healthand HumanServices(HHS) 
programs as well as the health and welfare of beneficiaries served by those programs.  This 
statutorymissionis carried outthrougha nationwidenetworkof audits, investigations,and 
inspectionsconductedby three OIGoperatingcomponents: the OffIceof AuditServices,the 
OffIce of Investigations, and the Office of Evaluation and Inspections. The OIG also informs the 
Secretaryof HHSofprogramandmanagementproblemsandrecommendscoursesto correct them. 
OFFICE  OF AUDIT  SERVICES 
The OIGSOfficeof AuditServices(OAS)providesall auditingservicesfor HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying out 
their respectiveresponsibilitiesandare intendedto provideindependentassessmentsof HHS 
programsand operationsin order to reducewaste, abuse,andmismanagementandto promote 
economy and efficiency throughout the Department. 
OFFICE  OF INVESTIGATIONS 
The OIGSOffice of Investigations(01) conducts crimina1, civil, and administrative investigations 
of allegationsof wrongdoingin HHSprogramsor to HHSbeneficiariesandofunjustenrichment 
by providers.  The investigativeefforts of 01 lead to criminal convictions, administrative   
sanctions, or civil money penalties.  The 01 also oversees State Medicaid fraud control units which 
investigate and prosecute fraud and patient abuse in the Medicaid program. 
OFFICE  OF EVALUATION  AND INSPECTIONS 
The OIGSOfficeof Evaluationand Inspections(OEI)conductsshort-termmanagementand 
program evaluations (called inspections)that focus on issues of concern to the Department, the 
Congress, and the public.  The findings and recommendationscontained in these inspection reports 
generaterapid, accurate, andup-to-dateinformationonthe efficiency,vulnerability,and 
effectivenessof departmentalprograms. 
This report was prepared under the direction of Mark R. Yessian, Ph.D., Regional Inspector 
General, and Martha B. Kvaal, Deputy Regional Inspector General, Boston Region, Office of 
Evaluation and Inspections. Project staff included: 
BOSTON REGION  HEADQUARTERS 
Lori B. Rutter, Lead Analyst  Tina Fuchs 
Joyce M. Greenleaf  EXECUTIVE  SUMMARY 
PURPOSE 
To review  the professional  literature  to determine  the advantages  and disadvantages  of 
Federal  categorical  and block grant approaches  to funding public health activities. 
BACKGROUND 
In this report  we respond to the Public Health  Services  (PHS) request  that we: 
(1) identify the advantages  and disadvantages  of categorical  grant approaches  to Federal 
funding,  (2) determine  the effects of block grant funding approaches,  and (3) suggest a 
research  and demonstration  strategy  for block grant funding.  At the request  of PHS staff, 
we did this by reviewing  the professional  literature  addressing  Federal  grant mechanisms, 
federalism,  and intergovernmental  relations. 
THE  CATEGORICAL  GRANT  EXPERIENCE 
Categorical grants have been the traditional  approach  to Federal grant making. 
  They have grown in number and appropriation  level,  and continue  to be the most 
widely used approach  for Federal  grant making. 
  They maximize  recipient  accountability  to the Federal  government. 
  They target  Federal  money to precisely  defined national  objectives. 
  They facilitate  mtionwide  adoption of innovative programs. 
Concerns about  categorical  grants have become  more widespread  as the number  of 
programs  has grown. 
  They add administrative  cost and complexity  to the Federal  grant system. 
.  They contribute  to fragmented  program  management  and service delivery. 
.  They inhibit program  responsiveness  to particular  State and local needs. 
The Federal government  has taken initiatives  during the past  three decades  to increase 
State and local government  discretion  over Federal aid. 
These initiatives  include the Partnership  for Health Act of 1966, General  Revenue  Sharing 
in the 1970s, the Omnibus Budget Reconciliation  Act (OBRA) Block Grants  in 1981, and 
many Federal  waivers  of categorical  grant provisions  in the  1990s. 
THE  BLOCK  GIWNT  EXPERIENCE 
Our analysis of the effects of block grants focuses on five questions commonly  asked 
about the block grant experience. 
i  Have block grants promoted  administrative  improvements  and cost-savings? 
  States reported  that block grants have improved  administrative  efficiency. 
  The extent of administrative  cost-savings  is unclear  because data are limited. 
Have block grants facilitated  services integration ? 
  Studies on block grants examined  services  integration  at the administrative  rather 
than the service  delivery  level. 
  The Partnership  for Health Act improved  intergovernmental  coordination,  but did 
not necessarily  promote  a system-wide  approach to public health problems. 
  The OBRA 1981 block grants enhanced  integration  at the administrative  level. 
Have block grants fostered  gretier  responsiveness  to State and local needs? 
 States claimed  that the Partnership  for Health Act allowed them to tailor  services  to 
their own needs,  but evaluators  contend that the block grant did not significantly 
reorder  State program  priorities. 
.	 States reported  minor  adjustments  to programs  under the OBRA 1981 block grants, 
but did not substantially  alter program  priorities. 
Have block grants replaced  State and local funding for  services? 
s  Scant data exist on how the Partnership  for Health block grant money was used, 
but studies  show that it promoted  new spending rather  than replaced  State money. 
  Under the OBRA  1981 block grants,  States replaced  lost Federal  funds in order  to 
maintain  service  levels. 
  Factors  other than block grant status better predict  whether  States use finds  for 
additive  or substitutive  purposes. 
Have block grants  left certain client groups more vulnerable? 
 Block grants  often include special targeting  provisions  to ensure  that Federal 
fimding is allocated  to the neediest populations.  The effectiveness  of such 
provisions  is unproven. 
  Limited  data suggest no major  differences  in the client populations  served under 
the Partnership  for Health Act and the former categorical  programs  included  in it. 
  The OBRA 1981 block grants contained provisions  to ensure targeting,  but there 
has been little examination  of their impact on the poor. 
ii  RECOMMENDATIONS  FOR  RESEARCH  AND  DEMONSTRATION 
17zePublic Health  Service should develop  a strategy  to use performance  indicators  in 
ways that will allow grantees  substantial  discretion  in using Federal funds  and,  at the 
same time,  hold them sufficiently  accountable for  their performance. 
The Presidents  Fiscal  Year  1996 budget calls for the Public Health  Service to make a 
significant  commitment  to program  simplification  by consolidating  108 programs  into  16. 
Given the additional  interest  in block grants  in Congress,  the Public Health Service must 
give major  attention  to the development  of funding mechanisms  that afford grantees 
substantial  discretion  and yet hold them accountable  for performance.  The literature  and 
the experiences  it examines  offer little guidance  on how to establish  such a performance 
based system of block grants. 
It is vital,  therefore,  to conduct an active research  and demonstration  effort that examines 
how block grants  and performance  indicators  can be uselidly  linked.  Toward  this end,  the 
Public Health  Service could examine  ways in which block grant recipients: 
  identify relevant  indicators  of performance,

.  develop mechanisms  for collecting  performance  data,

.  present  and disseminate  performance  data,  and

  use such data to improve their performance  and/or  refine  their objectives.

It is also important  to focus attention  on the Federal  governments  oversight  role with 
respect to block grants  and examine  approaches  it could use to: 
  ensure adequate performance  of grantees. 
The thrust of this research  and demonstration  strategy  should be directed  to future efforts 
that could be undertaken  along with the provision  of block grants.  To a limited extent, 
however,  it might also encompass  a retrospective  look at block or categorical  grant 
programs  to identify  insights they offer for the development  of performance  based block 
grants.  The Maternal  and Child Health  Block Grant Program,  which calls for States to 
submit performance  data to the Public Health Service,  could be a good candidate  for such 
inquiry. 
COMMENTS  ON THE  DRAFT  REPORT 
The Assistant Secretary  for Planning  and Evaluation  reviewed  the report  and concurred 
without elaboration.  The Public Health  Service (PHS) also reviewed  the report.  Its 
comments  appear  in fill  in appendix  B. 
The PHS concurred  with our recommendation.  In so doing,  it noted two actions it has 
undertaken  that move in the direction  of our recommendation.  One is the  Performance 
Partnership  Grants  program  that has been proposed  to Congress.  The other is an 
111  initiative  to establish  and use performance  measures  whether they are funded through  the 
categorical  or block grant mechanism.  
We recognize  the relevance  and importance  of these actions.  In tandem  with them,  we 
urge PHS to take maximum  advantage  of current  research  and demonstration  opportunities 
available  in order  to promote  better understandings  on just how block grants and 
performance  indicators  can be usefully  linked.  In our report,  we suggest in some detail 
directions  that can be taken in that regard. 
The PHS suggested  two technical  changes,  both of which we made in the final report. 
. 
iv  TABLE  OF  CONTENTS 
PAGE

EXECUTIVE  SUMMARY

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

THE  CATEGORICAL  GRANT  EXPERIENCE  .  . . . .  . .  . . . .  . . . . . . . . . . . .  5

.  categoricalgl-ants  are t.raditional approach  to grant making  . . . . . . . . . . . . . . .  5

.  Widespread  concerns  about categorical  grants  . . . . . . . . . . . . . . . . . . . . . . . 6

.  Federal  initiatives  to increase discretion  ov~r Federal  aid  . . . . . . . . . . . . . . . .  8

THE  BLOCK  GRANT  EXPERIENCE.  . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
.  Have block grants  improved  administrative  efficiency?  . . . . . . . . . . . . . . . . .  10
.  Have block grants facilitated  services  integration?  . . . . . . . . . . . . . . . . . . . .  12

.

.  Have block grants  fostered greater  responsiveness  to needs?  . . . . . . . . . . . . .  13

.  Have block grants replaced  State and local funding for services?  . . . . . . . . . . .  15

.  Have block grants  left certain client groups more vulnerable?  . . . . . . . . . . . . .  16

RECOMMENDATIONS  FOR  RESEARCH  AND DEMONSTRATION  . . . . . . .  19

COMMENTS  ON THE DRAFI REPORT  . . . . . . . . . . . . . . . . . . . . . . ...24

APPENDICES

A:
 Annotated  Bibliography  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  A-l 
B.  Complete  Comments  onthe  Draft  Report  . . . . . . . . . . . . . . . . . . . . . . ..  B-l 
c:  Endnotes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. C-l  INTRODUCTION
PURPOSE 
To review  the professional  literature  to determine  the advantages  and disadvantages  of 
Federal  categorical  and block grant approaches  to funding public health activities. 
OBJECTIVES 
To identify the advantages  and disadvantages  of categorical  grant approaches  to Federai 
funding. 
To determine  the effects  ofblock  grant funding approaches  as identified  inthe 
professioml  literature. 
To suggest a research  and demonstration  strategy  for block grant finding. 
BACKGROUND 
Rationale for  the Repoti 
In May  1994, when natioml  healticare  refomwas  being comidered  by Congress,  the 
Public Health  Service  (PHS), through  the Office of the Assistant  Secretary  for Health, 
asked us to conduct  a review  of the professional  literature  to identify the comparative 
advantages  and disadvantages  of categorical  and block grant funding approaches  to public 
health programs.  The PHS expected  that this review  would facilitate  its considerations 
concerning  how public  health funds could best be distributed  under  a reformed  national 
health care system. 
In August  1994, we prepared  a working  draft of the report  in response  to the PHS 
request.  By the time we met with PHS officials to review the report,  Congress had 
decided not to carry  out health care reform  in 1994; thus, the initial rationale  for our 
report  was less compelling. 
Yet, even without health care reform,  the issue of reforming  the current  highly categorical 
approach  to Federal  finding  remains  pressing.  The Office of the Vice President  set the 
tone in this regard  when it issued the report  of the National  Performance  Review in 
September  1993.  That report,  which called for a reassessment  of the Federal  grant  system 
and a reduction  in the number  of categorical  grant programs,  contended  that  the current 
system of Federal  grant making fragments  the ability of government  at all levels to 
address peoples  needs in an integrated  manner  . . . by establishing  often incompatible 
eligibility  standards  and administrative  rules and requirements,  the proliferation  of 
categorical  grants has made government  at all levels less effective.1 
* 
1  Throughout  1994, many  States were making requests for Federal  waivers  from categorical 
progrms  toetince  tieircapacity  todevelop  imovative  approaches  oftieir  own.  The 
Fall  1994 political  campaign  and the November  elections reflected  considerable  popular 
support for reducing  the scope of the Federal  bureaucracy  and giving State governments 
increased  discretion  in the use of Federal  funds. 
In view of these developments,  PHS, during a review  of our working  report  in November 
1994, underscored  the continued  relevance  of our review of categorical  and block grant 
funding  approaches  and urged us to expand our report.  Specifically,  PHS asked us to 
offer recommendations  on a research  and demonstration  strategy  that might be undertaken 
in concert  with block grants--one  that would add to our knowledge  base on how block 
grants could serve as an effective complement  to categorical  grant programs. 
Our inquiry gained  relevance  in February  1995 when the President  issued his budget  for 
Fiscal  Year  1996.  That budget calls for major consolidations  of programs  in PHS.  It 
proposes  that 32 programs  in the Centers  for Disease Control  and Prevention  be combined 
into 3, that 50 programs  in the Health Resources  and Services Administration  be lumped 
into 9 clusters,  and that 26 programs  in the Substance Abuse and Mental Health  Services 
Administration  be consolidated  into 4. 
In this report  we respond  to the PHS requests.  We start out by identifying  the advantages 
and disadvantages  long associated  with categorical  grants--the  most traditional  and 
prominent  Federal  funding approach.  We then turn to an examimtion  of the central 
questions  typically  posed about the effects of block grants.  We conclude  by suggesting 
directions  PHS can take that would enable it to respond to the considerable  current  interest 
in block  grants and at the same time examine how best to build in necessary  accountability 
safeguards. 
Types of Federal  Grants 
Historically,  Federal  grant programs  have been classified  in three  main groups  according 
to level of recipient  discretion:  categorical  grants being the most restrictive,  block grants 
falling somewhere  in the middle,  and general  revenue  sharing (GRS) providing  virtually 
unrestricted  assistance.  Currently,  the most important  division  in the Federal  grant system 
is between categorical  and block grants.  General  revenue  sharing  was termimted  in 1986 
due to declining  political  support amidst concerns about accountability.  Sometimes  the 
differences  in funding mechanisms  are clearer  in the abstract than in implementation,  but 
for the purposes  of definition  we will use the following continuum: 
2
 FIGURE  1 
Continuumof Federal  Grants  by Recipient  Discretion 
Least Restrictive  Most Restrictive

I -------------------------- -------------------- -----------I------------------------------ -------------------- 1

General  Revenue  Sharing  Block Grants  Categorical  Grants

Categorical  grants are primarily  for specifically  and narrowly  defined purposes  andare 
tiemost  restictive  intemsof  howmuch  discretion  they give torecipients~  Recipients 
of categorical  grants may be State or local governments  or non-profit  institutions. 
Categorical  grants typically have mandated  Federal  application,  eligibility,  and reporting 
requirements  intended to ensure that programs  and policies  reflect  national goals. 
Categorical  grants are the most prominent  in both numbers  of programs  and amount of 
dollars. 3  They are intended to support activity  in  particular  areas,  such as community 
mental health,  hemophilia,  and alcoholism. 
Block grants are broader  in scope than categorical  and have fewer  Federal  requirements. 
They allow recipients  considerable  discretion  in determining  specific  activities  funded 
within their program  areas,  but still maintain  certain  substantive  goals and objectives. 
Administrative,  fiscal,  reporting  and other requirements  are kept to a minimum.  These 
grants are provided  chiefly to State governments.  Block grants represent  a small portion 
of Federal  grants,  and are designed to support activity  in broader  areas such as preventive 
health and health  services,  maternal  and child health,  and substance  abuse. 
It is important  to point out that particular  programs  can fall at different  points of the 
continuum  and that,  as a result,  there  are many programs  that are hybrids of block and 
categorical  grant approaches.  An example  would be the Maternal  and Child Health Block 
Grant.  When established  in 1981 (as Title V of the Social Security  Act), the program 
quite clearly  belonged  at the block grant point of the continuum,  as it afforded  extensive 
discretion  to State grantees.  In 1989, however,  Congress  chose to limit that discretion  in 
various ways and to tie finding  for the program  in more closely with applicable  health 
status goals and objectives  set forth under the  Year 2000 Objectives  established  by the 
Public Health  Service. 
It is also important  to recognize  that the terms  block grant  and  categorical  grant  are 
sometimes used in different  ways.  For example,  a program  having  a narrowly  defined 
purpose but affording  grantees  substantial  discretion  might be called  a block grant by 
some and a categorical  grant by others.  We have found,  however,  that over time,  the 
degree  of discretion  afforded the grantee  is the central  distinguishing  feature between the 
two types of grants.  For that reason and the sake of clarity,  we stress that distinction  in 
this report. 
3
 This report  is based primarily  on a review  of the policy literature  on Federal  grants, 
federalism,  intergovernmental  relations,  and public health programs  published  by journals, 
research  institutions,  and government  oversight  agencies.  To locate additional  studies,  we 
contacted  academics  in public health and intergovemmental  relations  and spoke with 
representatives  from the Natioml  Council  of State Legislatures,  the National  Governors 
Association,  the Council  of State Governments,  and the Intergovemmental  Health Policy 
Project. 
We conducted  this study in accordance  with the Quality Standards for  Inspections 
issued by the Presidents  Council  on Integrity  and Efficiency. 
4
 THE  CATEGORICAL  GRANT 
EXPERIENCE 
The following  information  is drawn from a review  of the literature  on the Federal  grant 
system.  It is meant to confkrn  the history and trends in Federal  grant making to provide  a 
better understanding  of the context for grant reform. 
CATEGORICAL  GRANTS  HAVE  BEEN  THE  TIU4DITIONAL  APPROACH  TO 
FEDERAL  GRANT  MAKING. 
  They have grown  in number and appropriation  level and continue to be the most 
widely  used approach for  Federal grant making. 
Federal  grants  have historically  been directed  at narrow,  categorical  programs  with 
specific purposes  and tight Federal  spending requirements.  Despite experimentation  with 
other funding mechanisms,  the main vehicle of Federal  grant expansion  over the past three 
decades has been the categorical  grant.  The total number  of Federal  categorical  grant 
programs  offering  funding to State and local governments  increased  from 422 to 593 
between  1975 and 1993.4  Likewise,  this increase was matched  by similar growth  in 
appropriations.  In constant dollars,  grant outlays for categorical  rose from  $77.6 billion 
in 1975 to $147.4  billion in 1993.5  In contrast,  there were 5 block grant programs  in 
1975 and 15 in 1993; block grant outlays in 1975 totaled $9.3 billion compared  to 
$17.6 billion  in 1993 in constant dollars.G 
  l%ey maximize  recipient  accountability  to the Federal government. 
Categorical  grants,  with their extensive  eligibility,  pltig,  spending,  and reporting 
requirements,  are often viewed as the best way to make programs  accountable  at the 
Federal  level.  These requirements  are intended to ensure both the proper  use of Federal 
funds and effective  implementation  of Federally-funded  programs. 
The widespread  perception  that categorical  are most accountable  to the Federal 
government  may explain why they have been the most prolific.  Congress,  the 
Administration,  Federal  administering  agencies,  and national  interest  groups  all play roles 
in designing,  funding,  regulating,  and implementing  categorical  programs.  But it is 
Congress  that ultimately  determines  how much money to appropriate  for Federal  grants, 
and Congress  generally  believes that it has greater  control over Federal  money  in a 
categorical  system.  Congress has traditionally  preferred  categorical  because  of these 
tighter  controls.  Other proponents  of categorical,  like interest  groups,  also favor 
categorical  programs  because they can concentrate  their efforts  on lobbying Congress 
rather  than divide their time among 50 different  State legislatures.7 
5
   l%ey target Federal money to precisely  defined  national  objectives. 
Categorical  grants,  with their strict definitions  and requirements,  may provide  the best 
guarantee  that Federal  funds will be used to advance specific national purposes.  An 
Advisory  Commission  on Intergovernmental  Relations  (ACIR) study that examined  all 
sides of the debate  stated that  they [categorical]  appear  to offer the most efficient,  direct 
administrative  means for securing  any national  objective.8  Historically,  categorical 
grants were established  in response to particular  needs or problems  that were of national 
interest  and concern,  and Federal  funds were authorized  primarily  to stimulate  States and 
localities  to take remedial  actions.9  One reason that Congress  has preferred  categorical 
grants over other approaches  is because  it views them as effective  instruments  for 
influencing  State and local governments  to provide  certain  services. 10 In addition, 
Congress has preferred  categorical  because  they fund programs  directed  at specific 
problems,  and,  therefore,  may find it helpful to refer  to these programs  when seeking 
constituent  support. 
  They facilitate  nationwide  adoption  of innovative programs. 
Sometimes Federal  categorical  grants  are designed to promote  widespread  adoption of 
innovative methods  for combating  particular  health problems.  Program  innovations 
pioneered  in State or local health departments  can be replicated  on a national  level through 
a Federal  categorical  grant to encourage  States and localities  to spend money on particular 
problems.  In the past,  advocates  of categorical  grants have credited  these specific grants 
with fostering  new programs  and enlisting  support from interested  groups--primarily 
because categorical  are created  to fund new programs  rather  than expand general  health 
grants. 11 
CONCERNS  ABOUT  CATEGORICAL  GRANTS  HAVE  BECOME  MORE 
WIDESPREAD  AS THE  NUMBER  OF PROGRAMS  HAS GROWN. 
  They add administr~ve  cost and complexity  to the Federal grant system. 
Critics  claim that the existence  of numerous,  specialized  categorical  grants presents 
excessive  administrative  reporting  and accounting  problems  for grant recipients,  and 
inhibits efficiency  and economy  in distributing  Federal  grants. 12 The most outspoken 
critics  of categorical  grants have been public administrators  with broad responsibility, 
academics;  State and local government  officials and service providers,  and policy  research 
institutions  like the ACIR and the General  Accounting  Office (GAO).  These groups have 
evaluated  Federal  grant programs  and have documented  the administrative  burdens placed 
on recipients  of categorical  grants. 
Many studies conducted  over several decades  report  that State and local governments  are 
concerned  about the high administrative  costs and excessive  paperwork  associated  with 
categorical  grants.  An ACIR survey conducted  almost 20 years ago found that State and 
local governments  chief complaints  about categorical  were the excessive paperwork  and 
administrative  complexity  that they attributed  to Federal  involvement  with these grants. 13 
6  In particular,  Stiteand  local movements  have been concerned  about thegrowtignuber 
of Federal  planning  and reporting  requirements  that drain staff resources. 14 Many of the 
same fundamental  difficulties  remain  today. 
  They contibute to fragmented  program  management  and service delivery. 
Another  lingering  criticism  of the categorical  grant system is that it is fragmented  and 
results  in duplication  and overlap  of programs.  According  to an ACIR report,  excessive 
categorization  and overlapping  of grants create  administrative  problems  at all levels and 
handicap  the development  of a coordinated  attack on community  problems. 15 Problems 
of planning,  coordination,  and service  delivery  can get especially  confounded  in a multi-
layered  bureaucracy  that involves Federal,  State, and local governments. lb 
Some critics  blame  fragmentation  on the increase  in the number  of categorical  grant 
programs. *7 However,  the fragmentation  may also result from excessive  program 
specificity,  with clusters  of several  grants for servicing,  planning,  training,  and 
demonstrating  in the same narrow  program  area. 18  This categorical  specificity  may be a 
reflection  of our political  system:  categorical  are at the nexus in the  iron triangle  of 
special  interest  groups,  Congress,  and Federal program  bureaus.  Some contend that the 
prevalence  of categorical  is testament  that the Federal  grant system is not a system at all. 
Instead,  these programs  have developed  piecemeal,  with little consideration  for the overall 
needs of, or the overall  impact on,  State and local governments. 19 
All levels of government  have devoted  considerable  attention to improving  coordination  of 
categorical  grant programs  over the past few decades.  The Federal  government  has 
implemented  a wide variety  of reforms  to achieve this goal, but none has had more than 
limited success. 20 Failed attempts  to improve coordination  among programs,  the ACIR 
concludes,  have demonstrated  that Federal  agencies have few incentives  to standardize, 
simplify,  or target  their activities.  Their primary  concern  is to be able to account  for and 
make effective  use of each specific  grant program  they administer. 2* 
  They inhibit program  responsiveness  to paticular  State and local needs. 
Critics  claim that the restrictive  nature  of categorical  grants hinders  Federal

responsiveness  to the rapidly changing  and diverse needs of State and local governments.

With more than 50 States and territories,  and thousands of jurisdictions,  opponents  of

categorical  contend  that the Federal  government  is unable to respond  effectively  to local

concerns  with categorical  grants.  Most Federal  grants assume that national concerns  are

complementary  to State and local needs.  However,  there are instances when these  sets of

needs differ.  Critics  say that categorical  grants  lack the flexibility  State and local officials

need,  particularly  in fast-changing  areas like public health,  to adopt new approaches  in

disease control  and to enact programs  that reflect the needs of their populations.  Critics

also argue that the ability to be responsive  to State and local needs is compromised  by the

categorical  grant  system with its narrow  allowable uses and web of Federal

requirements. 22

7
 THE  FEDERAL  GOVERNMENT  HAS  TAKEN  INITIATIVES  OVER  THE  PAST 
THREE  DECADES  TO  INCREASE  STATE  AND  LOCAL  GOVERNMENT 
DISCRETION  OVER  FEDERAL  AID. 
Amidst the growing  number of categorical  programs,  the Federal  government  has 
experimented  with several more flexible funding approaches.  These experiments,  which 
give State and local governments  greater  discretion  over Federal  funds,  include block 
grants,  general  revenue  sharing (GRS), and Federal  waivers. 
.  Pa~ership  for  Health Act of 1966:  A Block  Grant 
The f~st modern  block grant to be enacted was the Partnership  for Health Act (PHA) of 
1966.  The PHA revised  the Federal  health grant system by consolidating  nine categorical 
health  service  formula  grants into one block grant program.  Its purpose  was to develop 
comprehensive  health planning at all levels of government,  to strengthen  State health 
agencies,  and to support the State and local health  services  in a more flexible manner.23 
The PHA simplified  administrative  procedures,  which,  in turn,  resulted  in the Department 
of Health,  Education  and Welfare  assuming a hands-off attitude  toward monitoring  and 
implementation  of the program.  Throughout  the  1970s, the PHA lost ground because 
Congress  enacted  numerous  new categorical  programs  that logically  could have been 
folded into it.  ThePHA  block grant never became  a significant  vehicle for change  in the 
public  health arena,  as it never accounted  for more than 3 percent  of State public  health 
expenditures .24 The PHAs limited financial  significance  coupled  with political 
inattention ultimately  resulted  in its demise. 
  General Revenue  Sharing in the 1970s 
General  Revenue  Sharing (GRS) was an entitlement  program  enacted by the New

Federalists  to increase  State discretion  over distribution  of Federal  grant funds.  State

officials.  not Federal  administrators,  determined  who received  Federal  grants  and in what

amounts.  The GRS was intended to consolidate  Federal  grant programs  and eliminate  the

expansion  of Federal  program  priorities,  mandates,  and monitoring  and reporting

requirements. 25 It required  no application  or granting-agency  approval  to receive  Federal

fi.mds.zb The GRS was primarily  a mechanism  for transferring  fimds from the national  to

the local level with little Federal  decision-making.

However,  the GRS never lived up to its stated goals.z  The scope and number  of

Federal  categorical  programs  continued  to grow and minimized  the impact of GRS.  To

compound  the problems,  persistent  inflation throughout  the  1970s produced  a tax revolt

which resulted  in an economic  slowdown and a decline  in the growth of intergovernmental

aid.28 Bv 1986, these conditions converged  with Congressional  commitment  to

categori~al  grants,  and general  revenue  sharing was terminated.29

8
 .  l%e Omnibus Budget  Reconciliation  Act  (OBRA) 1981 Block  Grants 
Block grants  reemerged  as a funding mechanism  in the early  1980s in response to 
continued  administrative  and political  criticisms  of categorical  grants and the desire to 
curb Federal  spending.  Congress  enacted  nine block grants under the OBRA of 1981 
-- four of which are administered  by the Public Health  Service.  These public health 
block grants consolidated  21 categorical  programs  and reduced  the aggregate  Federal 
funding levels up to 25 percent.  Of these block grants,  three  -- Maternal  and Child 
Health  (MCH),  Preventive  Health  and Health  Services  (PHHS),  and Alcoholism,  Drug 
Abuse and Mental Health  Services  (ADMHS) -- were implemented.30  Evidence  on early 
implementation  of the 1981 block grants showed that States did at least as good a job  in 
administration  of block grants as the Federal  government  had done formerly.  Even 
interest  groups and service providers  with a large  stake in maintaining  a categorical 
system reported  that they were by and large neutral  toward the  1981 block grants as an 
administrative  reform  after three years of implementation  experience .31  Subsequent 
proposals  for the creation  of block grants failed,  however,  because they became  identified 
as political  instruments  of domestic  budget-cutting. 
  Federal waivers in the 1990s 
Recently,  waivers  have become  an increasingly  popular  approach  for enhancing  State 
discretion  over Federal  funds.  The number  of State applications  for Federal  waivers  has 
increased  for the Medicaid  and Aid for Families  with Dependent  Children  (AFDC) 
programs.  From  April  1993 to August  1994,  17 States filed applications  for Section  1115 
Medicaid  waivers;  in the past,  the Medicaid  program  received  on average  one to three 
waiver applications  per year.  During this same period,  52 applications  for AFDC  waivers 
were submitted  compared  to a total of 33 applications  received  during the preceding  four 
years. 32 These waivers  free States from Federal  regulations,  while allowing them to 
experiment  with unconventional  administrative  or service delivery  approaches. 
9
 THE  BLOCK  GRANT  EXPERIENCE 
Most literature  on Federal  grant funding approaches  was published  in the  1970s and 1980s 
when political  attention  was focussed on reforming  the Federal  grant system.  We 
reviewed  evaluations  of the shift from categorical  to block grant funding for public health 
programs  conducted  by academics,  the GAO, the ACIR,  and various  contractors  hired by 
the Department.  These evaluations  focus primarily  on the Partnership  for Health Act of 
1966 and the three  PHS-administered  block grants erected  under the Omnibus Budget 
Reconciliation  Act (OBRA) of 1981. 
During  our search  we found that few studies of public health block grants were conducted 
after the mid-1980s.  The lack of analysis of these programs  may be due to lack of data, 
because  most Federal  reporting  requirements  were removed  when categorical  programs 
were consolidated  into block grants.  Perhaps  the dearth of information,  coupled with 
almost a decade  of political  inattention to reforming  the Federal  grant  system,  explain  why 
so little has been written  on this topic in recent years. 
It is difficult  to generalize  about State experiences  under block grants because  these grants 
have varied widely  in structure,  legislative  intent,  and objectives.  The level of funding, 
the increasing  categorization  imposed by Congress  over time,  and previous  State 
involvement  in the program  area have also affected block grant perforrnance.33 
Nevertheless,  despite these important  differences  among the block grants,  some common 
lessons have emerged  out of the early experiences  in implementing  block grants.  This 
analysis  identifies  those lessons by focusing on questions commonly  asked about the block 
grant experience. 
HAVE  BLOCK  GRANTS  PROMOTED  ADMINISTRATIVE  IMPROVEMENTS 
AND COST-SAVINGS? 
  States reported  that block grants improved  administrative  efficiency. 
The literature  evaluating  block grants,  particularly  the Partnership  for Health Act of 1966 
and the three  PHS-administered  block grants enacted by OBRA 1981, shows that most 
States surveyed  altered  their administrative  systems and made management  improvements 
in response  to block grants. 34 
A 1977  ACIR study that examined  State experiences  under the Partnership  for Health Act 
and the three  other block grants  (Comprehensive  Employment  and Training  Act,  Crime 
Control  and Safe Streets Act, and Community  Development  Block Grant)  implemented  in 
the  1960s and  1970s indicated that significant policy and administrative  decentralization 
was achieved,  Federal  personnel  and paperwork  costs were reduced. 35 Administrative 
improvements  resulted  primarily  from the requirement  that State health agencies  submit 
one comprehensive  State plan for all public health activities  rather  than comply  with many 
separate  reporting  requirements. 
10
 A series of GAO studies reported  on States experiences  under  the PHS-administered  1981 
block grants and found that,  of the  13 States surveyed,  most reported  having implemented 
management  improvements  as a result of the block grants.  The GAO found that almost 
two-thirds  of State respondents  reported  reduced  time and effort  spent in preparing 
program  applications.  In addition,  almost three-fourths  claimed  that they spent less time 
and effort reporting  to the Federal  government  under block grants  compared  to categorical 
programs.  One-third  of the States surveyed  reported  improving  the use of personnel  as a 
direct result of the block grants;  two-thirds  of the State respondents  reported  altering  their 
administrative  procedures  in response  to block grants.3G 
Almost all of the  13 States included  in a GAO survey reported  administrative 
improvements  under the Alcohol,  Drug Abuse,  and Mental  Health  Services  (ADMHS) and 
Maternal  and Child Health  (MCH) block grants.  Most of these States reported  reducing 
time and effort  involved in preparing  grant applications  and reporting  to the Federal 
government  under  ADMHS.37  In an Urban Institute study of 18 States,  many States 
reported  that ADMHS enabled them to standardize  administrative  requirements  and to 
improve planning,  budgeting,  and the use of personnel .38 The GAO found that States 
reported  improved  administrative  efficiency  by integrating  MCH planning  into the overall 
health planning  and budgeting processes .39 According  to the Urban Institute  study,  some 
States enhanced  administrative  efficiency  by creating  mini-blocks  that devolved 
responsibility  to localities.  Others reported  improvements  and suggested  potential  savings 
at the local level from grant consolidation  and streamlined  application  procedures.a 
Some States surveyed  by the Urban Institute  reported  that the implementation  of the 
Preventive  Health  and Health Services  (PHHS) block grant was time-consuming  and 
expensive  at first,  but agreed that it eventually  lightened their paperwork.41  According 
to a GAO survey of 13 States, PHHS implementation  was accompanied  by reduced 
Federal  administrative  requirements  in such areas as preparing  applications  and 
reports. 42 Nine of the 18 States that the Urban Institute  surveyed  altered  their 
administrative  practices  in response to the PHHS block grant,  but many of these States 
reported  that they passed on the burden to local grantees .43 While  States report  benefits 
from administrative  simplification,  many may well have passed on their administrative 
responsibilities  onto local grantees  rather  than actually reducing  the complexity  and 
amount of paperwork. 
  l%e extent of administrative  cost-savings  is unclear because data are limited. 
It is difficult to determine  whether block grants reduced  administrative  costs because  so 
little quantitative  data have been collected,  and existing data are of questionable  reliability. 
The difficulties  in interpreting  these data are documented  in evaluations  conducted  by the 
GAO, the Brookings  Institution,  the American  Enterprise  Institute,  and the Urban 
Institute.  These studies discuss both limitations  in the availability  of data and 
measurement  errors  in the existing data.  Most pre- and post-consolidation  evaluations 
comparing  administrative  costs between block grants and categorical  programs  have 
revealed  no conclusive  evidence to support the claim that block grants  led to sizeable 
11
 reductions  (10 percent  or more)  in administrative  costs, but do not exclude the possibility 
that some cost savings emerged.~ 
Attempts by the GAO and ACIR to compare  administrative  costs under the Partnership  for 
Health to the former  categorical  have not yielded compelling  findings.  The existing data 
on administrative  costs under the PHA suggest little difference  between administrative 
costs for the block grant and the former  categorical.  Administrative  costs averaged 
9.9 percent  between  FY  1975 and FY  1980, which falls within the range  reported  for 
categorical  programs. 45 In part,  this higher  than expected administrative  cost may have 
been because the newly created  Partnership  for Health Program  funded grantees  for a 
wider variety  of health services  than the previous  categorical.  Case studies of the 
Partnership  for Health programs  suggest that the costs of applying for,  allocating,  and 
monitoring  may have been as low as 2 to 3 percent,  but because PHA did not restrict 
administrative  expenditures  to a set of prescribed  services,  State health departments  fimded 
a variety of activities  with PHA money.4b  These confounding  factors may have had 
independent  effects on administrative  costs.  However,  the lack of data on the Partnership 
for Health  implementation  makes it impossible  to isolate them.47 
While the OBRA  1981 block grants were enacted  to achieve more service at less cost,  
scant information  documenting  actual dollar  savings exists .48 An Urban Institute  study, 
conducted  3 years  after implementation,  showed that even block grant supporters  who 
claimed  that grant deregulation  would make it possible for States to absorb as much as 
20 to 25 percent  of the fimding reductions  through administrative  savings alone admitted 
that savings were  not that high. 49 Most States surveyed concluded  that the block grants 
had substantially  reduced  paperwork,  but had not significantly  reduced  administrative 
costs 50 A series  of GAO studies on the OBRA 1981 block grants corroborated  these 
findings and reported  that although States claimed reduced  administrative  costs, they had 
no documentation  on the magnitude  of dollar  savings resulting  from block grants. 
HAVE  BLOCK  GRANTS  FACILITATED  SERVICES  INTEGRATION? 
  Studies on block grants emphasized  services integration  at the administrabve rather 
than the service  delivery level. 
Block grants  aim to improve  coordination  across categorical  programs,  both at the 
administrative  and service delivery  levels .51 They are intended to have a system 
building  effect  on programs.  Yet,  system building at the service delivery  level has 
received  little attention  in evaluations  of the shift from categorical  to block grants.  Based 
on the limited  information  in the studies on State experiences,  it seems that more attention 
has been paid to the administrative  than the service delivery  aspects:  focussing on 
economy  and efficiency  inherent  in the consolidation  of program  planning,  budgeting,  and 
management  operations. 
12
   l%e Partnership for  Health Act improved  intergovernmental  coordination,  but did not 
necessarily promote  a system-wide  approach to public  health problems. 
The PHA was intended to create  an integrated  approach  to the planning,  financing,  and

delivery  of public health services  involving all levels of government  and the private

sector.52  One ACIR analysis of the PHA and the three other early block grants found

that significant  policy  and administrative  decentralization  had taken place  and

intergovernmental  coordination  had been facilitated .53 This was most likely the result  of

turning  over responsibility  for the block grant to the State health  agencies.

A second ACIR study,  which included in-depth State case studies,  revealed  that none of

the six States had implemented  a system-wide  approach  to public  health problems  in

response  to the Partnership  for Health.  The PHA was not identified  as an inhibitor  to

such an approach,  but,  on the other hand,  neither did it generate  such an approach.54

  The OBRA 1981 block grants enhanced integration  at the administr~ve  level. 
The Alcohol,  Drug Abuse,  and Mental Health Services block grant prompted  some 
improvements  in integration  at the administrative  level.  States had been heavily  involved 
in ADMHS programs  prior  to enactment  of the block grant,  and many of the programs 
funded by Federal  grants were quite similar to State programs.  The block grant provided 
opportunities  for administrative  consolidation. 55 All 18 States consolidated  these Federal 
programs  into their existing State systems. 
According  to the GAO,  integration  was also enhanced under the Preventive  Health and the 
Maternal  and Child Health block grants by combining  their planning  components  into their 
overall  health planning  and budgeting processes. 56 After the enactment  of these block 
grants,  decisions  about use of funds were linked to broader  policy decisions  on State 
health programs,  in the context of the availability  of funds from Federal,  State, and other 
sources. 57 
HAVE  BLOCK  GRANTS  FOSTERED  GREATER  RESPONSIVENESS  TO  STATE 
AND LOCAL  NEEDS? 
  States claimed  that the Partnership for  Health Act allowed them to tailor services  to 
their own needs,  but evaluators contend that the block grant did not signij7cantly reorder 
State program  priorities. 
An ACIR survey of officials in all 50 States revealed  that the most prized  feature of the 
Partnership  for Health was the flexibility  to use the funds where  the needs are the 
greatest  or priorities  highest,  and to respond to changes in health needs over time. 58 All 
but one of the States praised  the flexibility  of the PHA for allowing them to better meet 
State and local needs.  Some examples of State comments  include: 
13
 Delaware:  The country varies  in the priority  of needs unmet  in the public health 
field,  and the block grant potentially  provides  the flexibility  to meet these various 
priorities. 
Kentucky:  Weareable  to focus ourauention  onactial  problems  ratiertha 
expend resources  on low priority  areas. 
Texas:  Funds can be used comprehensively,  with the State agency establishing  its 
own priorities  with regard  to whom,  how, and where the funds can be best utilized 
in helping  satisfi  the public health needs of the States citizens .59 
Another  study of the Partnership  for Health,  conducted by a professor  at Wichita  State 
University,  investigated  whether the block grant resulted  in substantive  changes  in the 
expenditure  of State public health funds compared  with expenditures  under the former 
categorical  grants.  This study, based on responses  from State health officials in all 50 
States,  found  that while there have been changes resulting  from the shift to a block grant, 
they have generally  been minimal.~  It contends that increased  administrative  flexibility 
is not identical  to or even related  to focussing on major  new priorities.Gl 
A 1981  American  Enterprise  Institute  study of the Partnership  for Health also reported 
that the block grant did not lead to major  shifts in States program  priorities.  It concludes 
that because the Partnership  for Health fi.mds never accounted  for more than 3 percent  of 
State health department  expenditures,  the grant never exerted  much influence over service 
priorities.2 
  States reported  minor adjus~ents  to programs  under the OBRA 1981 block grants, 
but did not substantially  alter program priorities. 
Most program  areas that had been funded under the prior  categorical  programs  continued 
to receive  support under  the OBRA 1981 block grants.  Although  such continuity  was 
evident,  minor  changes  in funding patterns  emerged  as States sought to assert their own 
priorities  while dealing  with funding limitations.b3  A GAO study of 13 States found that 
States recognized  their greater  decision-making  authority  to set program  priorities  and 
determine  the use of funds than they had under the prior  categorical  programs,  but did not 
exercise  it to make substantial  changes .w  Freed from Federal  restrictions  and program 
guidelines,  some States began to take advantage  of increased  flexibility  and transferred 
small portions  of funds across block grants. 
Programs  that fared best (financially)  under  the 1981 block grants  appeared to be those 
with statewide  application  and histories  of State as well as Federal  funding.  Some States 
reduced  or eliminated  funding for federally  supported projects,  and others realigned  the 
types of services  offered.G5 For example,  looking at the Maternal  and Child Health 
block grant in 18 States,  the Urban Institute  found that the Crippled  Childrens  Services 
program,  with its long history  of State involvement,  saw its share of funding grow in 
many States.  In contrast,  the finding  for the Lead-Based  Paint program--viewed  as a 
narrowly  focused,  urban program  with little State involvement--was  cut .fi 
14
 Almost all of the  18 States surveyed  by the Urban Institute reported  minor  adjustments  in

their program  mix in response  to the Preventive  Health and Health Services block

grant. c  To some extent,  this involved creating  new programs  or initiatives  within

existing programs.  However,  the majority  of the changes  involved shifting funding among

the old Federal  program  categories.c8

The same Urban Institute  study concluded  that the Alcohol,  Drug Abuse,  and Mental

Health  Services  block grant also resulted  in limited changes  across the program  areas.  By

and large  States maintained  the traditional  funding patterns.  In part,  this continuity  may

be due to the Federal  earmarks  dictating how to divide funds between  services  for

alcoholism  and drug abuse and which mental health providers  to fund.  Nonetheless,  most

States did not exercise  the little flexibility  afforded them.b9

HAVE  BLOCK  GRANTS  REPLACED  STATE  AND LOCAL  FUNDING  FOR

SERVICES?

  Scant data exist on how the Partnership for  Health block grant money  was used, but 
ACIR studies show that it promoted  new spending ralher than replaced  State money. 
Other than the ACIR study conducted  ten years after implementation,  there have been no 
national  evaluations  of the Partnership  for Health Act.  Little  information  exists showing 
whether  finds  were used to replace  State funds or to add to State public health budgets. 
In part,  the limited  accountability  requirements  may have resulted  in little reporting  and 
data collection  and led to a diminished  capacity to evaluate the impact of the shift from 
categorical  to block grant funding .70 However,  according  to the ACIR,  the minor  fiscal 
magnitude  of the Partnership  for Health  finds  renders  the issue of replacing  State money 
with Federal  funds inconsequential.  The PHA finding  continued  to equal or exceed  the 
total funding for the former  categorical  programs,  and total State and local public health 
expenditures  expanded.  Based on this evidence,  the ACIR suggests that PHA money  was 
used to expand  services  rather  than replace  State money with Federal  fimds.l 
.  Under the OBRA 1981 block grants,  States replaced lost Federal funds  in order to 
maintain  service  levels. 
The OBRA 1981 block grants did not result in replacement  of State money with Federal 
funds.  In fact,  in many instances,  the reverse  was true.  Public health block grants  were 
accompanied  by significant  cuts in Federal  finding  (as much as 25 percent),  so many 
States resorted  to replacing  lost Federal  fi.mds from their own treasuries  for programs  that 
they deemed  important.  Programs  with a history of State involvement,  whose benefits 
were spread throughout  the State,  or whose recipients  were viewed as particularly  needy, 
fared best.z  The Alcohol,  Drug Abuse,  and Mental Health  Services and Maternal  and 
Child health block grants,  both of which had strong State involvement,  were extremely 
successful  in securing  State and local funding to make up the difference  in their finding 
levels after Federal  cuts .73 
15
   Factors other than block grant status better predict  whether States use funds for 
additive  or substitutive purposes. 
An ACIR analysis  of States use of Federal  grants concluded  that a number  of factors  may 
influence  whether  a particular  grant program  is additive  or substitutive.  Rather  than type 
of grant,  it proposed  that the principal  factor is the recipients  interest  in the aided activity 
in relation  to competing  uses for funds.  Other factors  include the size of the recipient 
government,  the number  and variety of grant programs  in which it participates,  the timing 
and size of the grant,  and the grants requirements .74 A Brookings  Institution  study on 
Federal  aid contends that the type of grant is not the best predictor  of whether  States will 
use Federal  funds as replacement  money.  It argues that  all forms of Federal  aid to states 
and localities  are fungible,  no matter how ingenious the conditions  placed  on the use of 
grant moneys. 75 
A study published  in the Political Science  Quarterly points to a States fiscal condition  as 
a better  determinant  than type of grant in a States decision to use Federal  finds  as 
additive  or substitutive.  The more fiscally hard-pressed  a jurisdiction,  the more  likely it 
is to merge  Federal  grant funds with its own resources,  and use them to pay for the basic 
services  it provides ...If they are strong enough,  fiscal pressures  may cause generalist 
officials to use as much Federal  money as they can to do what in their view must be 
done. 76 
A 1985 Brookings  Institution  study concluded  that States and localities prefer  to use 
Federal  aid for additive purposes--to  enlarge  their programs--rather  than substitute  it for 
State money .77 It concludes  that recipient  governments  are aware  of the costs associated 
with using Federal  grants to support basic services.  States choose to avoid risks,  which 
include enforcement  of requirements  prohibiting  the maintenance  of existing programs 
with Federal  funds,  demands made by specialists and interest  groups that Federal  funds 
intended for their particular  programs  be protected,  and fear of becoming  reliant  on 
Federal  grants  which are often unstable .78 
HAVE  BLOCK  GRANTS  LEFI  CERTAIN  CLIENT  GROUPS  VULNERABLE? 
  Block grants  often include special targeting provisions  to ensure that Federal funding 
was allocated  to the neediest popul~ons.  The effectiveness  of such provisions  is 
unproven. 
Options for ensuring  that block grant finds  are targeted  to the needy include distribution 
formulas,  earmarking,  and hold harmless  provisions.  Most block grants  are allocated 
through  distribution  formulas  keyed to population  and financial need.  Proponents  argue 
that these formulas  are more egalitarian  than categorical  grants because  they emphasize 
need rather  than  grantsmanship  skills,  Yet, critics  claim that the political  compromises 
necessary  for Congressional  approval  of block grant distribution  formulas  make targeting 
resources  to particular  client groups difficult to achieve. 
16
 Legislative  earmarking  is another  way to alter block grants so that they channel certain 
amounts of money  into particular  program  areas.  A third means of targeting  block grants 
is through  inclusion  of hold harmless  provisions,  which are designed to guarantee 
funding to former  grantees  over a certain  period of time until they are no longer 
dependent  on Federal  aid.79 Any of these mechanisms  may help ensure that block 
grants  flexibility  does not result  in overlooking  certain  program  participants  and 
population  areas .80 
While these mechanisms  have been used to ensure that distribution  of funds through  block 
grants does not leave any client group vulnerable,  the debate  about the distributional 
impact of block grants has generated  significant controversy.  Advocacy  groups for the 
poor,  contending  that federally  administered  categorical  programs  are better able to target 
program  assistance  to those most in need,  have expressed  concerns  about block grants .81 
They fear that block grants will prompt  the elimination  of services  targeted  to poor and 
minority populations  over time. 82 This same concern  has been played out in Congress. 
When the  1981 block grants were introduced,  the Secretary  of Health and Human  Services 
maintained  that freeing  the States from Federal  guidelines  would permit  them to focus 
their efforts more effectively  on the truly needy.  Some members  of Congress  challenged 
this argument  claiming that,  once Federal  money was turned  over to the State legislatures, 
services to the disadvantaged  would be slashed. 83 
.  Limited  data suggest no major differences  in the client populations  served under the 
Partnership for  Health Act and the former  categorical programs  included in it. 
Because there have been no national pre-post  block grant evaluations  of the Partnership 
for Health,  it is difficult  to determine  what impact the shift from categorical  to the block 
grant had on particular  client groups.  The only protected  population  were those using 
mental health  services,  for which there  was a 15 percent  earmark;  otherwise  there  were 
essentially  no restrictions  on the programmatic  use of funds.  The little information 
available  suggests that there was no significant  change in the distribution  of resources 
under the PHA. 84 
.  The OBRA 1981 block grants contained provisions  to ensure targeting,  but there has 
been little examin~on  of their impact on the poor. 
It is difficult  to assess the impact of OBRA 1981 block grants on targeting  the poor.

First,  there has been a general  lack of evaluation  on the distributional  impact of these

block grants.  Second,  for programs  in which income eligibility  was maintained,  the

standards were tightened  in response to Federal  funding cuts.  On the one hand,  this move

was intended  to focus the reduced program  benefits more narrowly  on the poor,  but on the

other hand,  it can be viewed as an attempt to limit the number  of people receiving

services. 85

Finally,  some of the OBRA 1981 block grants contained  low-income  targeting  provisions.

For example,  the Maternal  and Child Health block grant mandated  that certain  services  be

provided  to clients with incomes below the official poverty  line.  However,  other services

17  authorized  under  MCH  were not limited to clients who met these eligibility 
requirements. G The Alcohol,  Drug Abuse,  and Mental Health Services,  the Preventive 
Health,  and the Maternal  and Child Health block grants  all included changes  in their 
distribution  formulas  to facilitate targeting.  These changes  instructed  the Secretary  of 
Health and Human  Services  to consider  States financial resources  and the size of their 
low-income  populations  when determining  appropriate  distribution.87 
The PHHS and ADMHS  block grants  included provisions  that required  grantees  to 
fund previously  supported  projects  in order to ensure that low-income  clients served by 
former  categorical  would continue to be served under the block grants .88 However,  as 
States began to establish  their own criteria  for targeting,  efforts to study the impact of 
targeting  on a nationwide  basis became  more difficult. 89 
18
 RECOMMENDATIONS  FOR 
RESEARCH  AND  DEMONSTRATION 
The literature  on the effects of block grants leaves many important  questions umnswered. 
It tells us that in various  settings at various  times they have contributed  to greater 
administrative  efficiency,  more integrated  management  systems,  and even increased  State 
and local spending.  But the evidence  in these areas is limited.  It is even more limited on 
questions concerning  the effect of block grants on administrative  costs,  service delivery, 
responsiveness  to State and local spending,  and targeting  services  to the needy. 
In part,  these limitations  are attributable  to the limited research  conducted  on block grants, 
especially  in recent  years.  In larger part,  however,  they are due to other more basic 
factors.  These include the (1) inherent  difficulty  in documenting  the effects of a granting 
mechanism  which aims to minimize  data reporting  requirements  and (2) limitations  of 
experimental  design research  techniques  in governmental  settings often experiencing  rapid 
political,  fiscal,  and/or  demographic  change. 
Yet, given the forces generating  greater  support for block grant approaches  and given 
PHS interest  in responding  constructively  to those forces,x  it is timely to delineate  a 
research  and demonstration  strategy for block grants that is consistent  with their inherent 
nature of offering  grantees  substantial discretion.  In this concluding  section,  we 
recommend  that PHS develop  such a strategy. 
The central  question  around which this strategy  should revolve  is the following: 
How can  the  Federal  government  enhance  the  discretion  of grantees 
and  at the  same  time  hold  them  sufficiently  accountable  for  their 
performance? 
Indeed,  if block grants  (whether through  formally  established  programs  or through  waiver 
mechanisms)  begin to shift from a relatively  minor portion  of Federal  grant-making  to a 
more significant  share,  finding workable  answers to this question  will become  increasingly 
important.  It will be vital that block grants become performance  based:  a direction  for 
which experience  and the professional  literature  provide  little guidance. 
Thus,  we offer the following recommendation.  It is directed  to PHS,  which requested  this 
report.  But the directions  we lay out are generic  enough to apply to the Department  of 
Health and Human  Services and even more broadly to the Federal  government. 
The Public Health  Service should develop  a strategy to use performance  indicators  in 
ways that will allow grantees  substantial  discretion  in using Federal funds  and,  at the 
same time,  hold them sufficiently  accountable for  their performance. 
19
 This strategy  should recognize  the considerable  diversity  across the countrys  political 
jurisdictions  and should view each recipient  of a block grant or Federal  waiver  as having 
both an opportunity  and responsibility  for contributing  to the knowledge  base on the 
central  question  identified  above.  It should focus on measuring  the performance  of 
grantees  more  than on reviewing  their detailed plans.  It should aim for continuous 
improvement  through  experiential  learning  and through the identification  and 
dissemination  of effective  practices. 
Toward  this end,  the Public Health  Service could examine ways in which block grant 
recipients  could do the following: 
IdentiJj  Relevant  Indicators  of Performance 
Broad statements  of goals and objectives  and benchmarks  of expected  accomplishments  at 
particular  target  times are usefhl starting  points,  but in themselves  are insufficient  bases 
for assessing performance.  They must be supplemented  by explicit  indicators  of 
performance,  expressed  to the maximum  extent feasible in terms  of outcomes--that  is, 
actual changes  in the conditions  of program  recipients.  The process  of identifying  and 
achieving  consensus  on such indicators  is, in itself,  an extremely  important  and difficult 
one.  It can contribute,  however,  not only to a better understanding  of program  results  but 
also to more refined  expressions  of program  intent. 
The PHS has already  begun moving in this direction.  The Maternal  and Child Health 
Block Grant,  administered  by the Maternal  and Child Health Bureau,  calls for grantees  to 
develop measurable  indicators  of performance  related  to the  Year 2000 Objectives 
developed  by PHS.  The ACCESS demonstration  program,  funded by the Center  for 
Mental Health  Services,  seeks to identi~  ways in which programs  serving mentally  ill 
homeless  adults can assess their performance  in improving  the lives of such individuals. 
The self-assessment  instrument  developed  by the Federation  of State Medical Boards, 
through funding by the Bureau of Health  Professions,  facilitates  efforts by State medical 
licensure  boards  to compare  and assess their performance. 
Among the research  and demonstration  questions that could be posed are these: 
What processes  are most effective  in facilitating  consensus  on pertinent 
indicators? 
Given resource  and data limitations,  what kind of indicators  are feasible? 
What ones facilitate  comparisons  over time and across jurisdictions? 
What  is a good mix of process,  output,  and outcome  indicators? 
Develop  Mechanisms for  Collecting  Performance  Data 
The successful  application  of performance  indicators will depend heavily on the feasibility 
of the operational  mechanisms  to be used once they are established.  A major challenge 
20  for architects  of these systems is to develop data collection  approaches  that are as 
minimally  intrusive  as possible to those actually delivering  services.  Particularly  in 
environments  where the demand for services exceeds the supply,  service deliverers  are 
unlikely  to show much enthusiasm  for new accountability  mechanisms  that call for them to 
devote additional  time to efforts to document  their activities. 
Among the research  and demonstration  questions ~hat could be posed are these: 
What kind of software programs  show the most promise  in allowing data 
to be captured  with maximum  efficiency? 
How are data collection  responsibilities  best divided between  service 
deliverers  and central  staff? 
What kind of oversight most effectively  contributes  to accurate  and 
consistent  data collection? 
Present  and Disseminate  Performance  Data 
How performance  data are displayed  and disseminated  affects how they will be used.  The 
challenge  is to present  and distribute  them in ways that facilitate  understanding,  not just 
by statisticians  and program  experts,  but also by general managers,  legislators,  and the 
general  public.  In this context,  the data are not intended to provide  deftitive  measures  of 
the success or failure  of particular  programs,  but rather  to facilitate  more effective 
questioning  about results.  If the data are presented  in ways that allow comparisons  over 
time or across jurisdictions,  then reviewers  are likely to pose basic questions that seek 
explanations  for the differences. 
Among the research  and demonstration  questions that could be posed are these: 
What kind of graphics  and textual presentations  are most effective  in 
facilitating  comparative  analyses? 
Are there different  approaches  that are suitable for different  audiences? 
What are the most effective ways of using  report cards  for grantees 
and/or  service providers? 
What dissemination  techniques  show the most promise? 
Use Pe@ormance  Data to Improve Performance  and/or Refine  Objectives 
In the continuous  quality improvement  approach  to enhancing  productivity,  performance 
data are intended  to stimulate discussion  about better ways to reach desired  ends and/or  to 
a reexamination  of what those ends should be.  The data should be used on an ongoing 
basis by grantees  to review  and improve their own operations;  they should not be viewed 
strictly  as a mechanism  for funders to assess the performance  of grantees. 
21
 Among the research  and demonstration  questions that could be posed are these: 
In what ways are grantees using performance  data to review their 
operations?  How do they facilitate  collegial  reviews?  Reviews by broader 
publics? 
What are the major barriers  they confront  in trying to use these data to improve 
performance?  How can they best address these barriers? 
What are the results?  Are grantees  making  actual changes based on a review  of 
performance  data?  What kind of changes are they making? 
The four main components  cited above--identifying  relevant  indicators  of performance, 
developing  mechanisms  for collecting  performance  data,  presenting  and disseminating 
performance  data,  and using such data to improve performance  and/or  refine objectives-
involve  scrutiny of what happens within the jurisdictions  using block grants.  As important 
as those internal dynamics  are,  they are not in themselves  sufficient  to afford the 
accountability  mentioned  in our central  question.  In that context,  it is also important  for 
PHS to examine  approaches  it could use to: 
Ensure Adequate  Performance  of Grantees 
Even with a block grant affording extensive  discretion,  a grantee  must in some meaningful 
ways remain  accountable  to the Federal  funders.  At the same time,  the Federal  funders 
also have the obligation  to carry  out their  stewardship  responsibilities  and yet remain  true 
to the principles  of a block grant.  Again,  there  is little experience  here that provides  a 
usefid road map;  knowledge  must be gained by conducting  an active research  and 
demonstration  effort  in concert  with block grant funding. 
Among the research  and demonstration  questions that could be posed are these: 
What is the potential  of performance  contracting?  Are there  viable mechanisms 
of providing  more  or less funding based on performance  as measured  by agreed 
upon indicators? 
How can the Federal  government  best ensure that performance  data are accurate 
and consistent  with established  definitions?  What kind of audits should be 
undertaken  toward  this end? 
What is the role for penalties  in a performance  based block grant system? 
Under what circumstances  and how might they be used? 
The five strategy  components  offered  above are presented  in the context of future efforts 
that could be undertaken  along with the provision  of grants that give grantees  substantial 
discretion  in how the funds are to be used.  For example,  these ideas could be used in 
22
 implementing  the extensive  program  consolidation  included in the Departments  Fiscal 
Year  1996 proposed  budget  for the Public Health Service (see page 2). 
To a limited extent,  it might also be useful to look retrospectively  at both block and 
categorical  grant programs  to identi~  any insights they offer to the establishment  of block 
grant mechanisms  which hold grantees  accountable  for performance. 
In this context,  the Maternal  and Child Health Block Grant Program  could be a good 
candidate  for inquiry.  Among the changes to that program  that Congress  made in 1989 
were those calling  for States to submit to PHS data that facilitate  measurement  of State 
progress  in meeting  Year 2000 Objectives.   Reviews  of how individual  States and PHS 
have responded  to this mandate  could be quite helpfi.d--in the sense of assessing the 
potential  of performance  indicators,  the barriers  faced in trying to use them,  and the ways 
in which these barriers  might be constructively  addressed. 
23
 COMMENTS  ON  THE  DRAFT  REPORT 
The Assistant  Secretary  for Planning  and Evaluation  reviewed  the report  and concurred 
without elaboration.  The Public Health Service (PHS) also reviewed  the report.  Its 
comments  appear  in fill  in appendix B. 
The PHS concurred  with our recommendation.  In so doing,  it noted two actions  it has 
undertaken  that move in the direction  of our recommendation.  One is the  Performance 
Partnership  Grants  program  that has been proposed  to Congress.  The other is an 
initiative  to establish  and use performance  measures  whether they are funded through  the 
categorical  or block grant mechanism.  
We recognize  the relevance  and importance  of these actions.  In tandem  with them,  we 
urge PHS to take maximum  advantage  of current  research  and demonstration  opportunities 
available  in order  to promote  better understandings  on just how block grants  and 
performance  indicators  can be usefully  linked.  In our report,  we suggest in some detail 
directions  that can be taken in that regard. 
The PHS suggested two technical  changes,  both of which we made in the final report. 
24
 APPENDIX  A 
ANNOTATED  BIBLIOGRAPHY 
This bibliography  includes three major  sections:  general  literature  on Federal  grants, 
literature  onthe  Partnership  for Health  Act,  andliterature  on the  1981 block grants.  This 
bibliography  summarizes  some of the major  studies that have provided  frameworks  for 
thinking about the issues included  inthebody  of the report. 
GENERAL  LITERATURE  ON FEDERAL  GRANTS 
1.  Advisory  Commission  on Intergovernmental  Relations,  Block  Grants:  A Comparative 
Analysis,  October  1977. 
Abstract:  This report  attempts  to clari~  the confusion  surrounding  the design and 
administration  of block grants.  It is based on the ACIRS assessments  of the 
application  of block grants to health,  crime control,  manpower,  and community 
development.  The report  includes a description  of the evolution  of the block grant 
concept,  its characteristics  and objectives,  and compares  them to the reality  of 
implementation.  This report  is intended to provide  a foundation  for 
recommendations  on the appropriate  use of the block grant by the Federal 
government. 
2.  Advisory  Commission  on Intergovernmental  Relations,  Summary and Concluding 
Observations,  June  1978. 
Abstract:  This is the final report  of the ACIRS 14-volume study of the 
intergovernmental  grant system conducted  between  1976 and 1978.  This report: 
(1) summarizes  the major findings,  conclusions,  and recommendations  of the entire 
study,  (2) analyzes  the changes  in the Federal  grant system in terms of 
intergovernmental  issues,  (3) identifies  the broad trends that characterize  Federal-
State-local  relations  and speculates  on the reasons for the trends,  (4) interprets  the 
long-term  impact of these trends  on American  federalism,  and (5) recommends  a 
five-point  intergovernmental  strategy  to meet the challenges  of the current  Federal 
grant system. 
3.  Claude E. Barfield,  Rethinking  Federalism:  Block Grants and Federal.  State. and 
Local Responsibilities,  American  Enterprise  Institute,  1981. 
Abstract:  This monograph  examines  the administrative  and political  results that 
occur when categorical  grants  are consolidated  into block grants.  It addresses 
questio~  regarding  the nature  and function of American  federalism  in the  1980s, 
and suggests a framework  for reordering  Federal,  State,  and local priorities.  This 
A-1  monograph  draws on other studies conducted  by the GAO, ACIR,  The Brookings 
Institution,  The Urban Institute,  and The National  Governors  Association  that 
examine  the impact of block grants on efficiency,  decentralization,  planning, 
coordination,  and generalist  control.  Chapter  four of this book,  entitled 
Evaluating  Block Grants:  The Previous  Experience  and Future  Expectations,  
examines  the administrative  arguments  behind the creation  of block grants  and is 
most relevant  to this study.  It proposes recommendations  for the design of future 
block grant  legislation. 
Important  Points: 
Avoid vague language  in the stated purpose  of a block grant.  Well-articulated

goals provide  clearer  direction  to the States and allow for more  accurate  evaluation

later.

Allow the States to hold separate public hearings  or to integrate  the block grant

into their  normal  budgetary  and legislative processes.

Include  Congressional  mandates  for audits that conform  to existing  standards  such

as OMB circulars  or GAO Standards  for Audits.

Set a Congressional  limit on overhead  for each block grant.  This limitation  would

allow flexibility  for disparate  administrative  costs from the individual  categorical

grants  folded into the block grant and encourage  States to watch for costly,

inefficient  administration.

Speci&  a uniform  definition  of low-income persons  in order to target block grant

funds to the neediest populations.

4.	 Robert  Agranoff  and Leonard  Robins,  How to Make Block Grants Work:  An 
Intergovernmental  Management  Perspective,  New England Journal  of Human Services, 
Winter  1982. 
Abstract:  This article describes  the characteristics  of block grants,  outlines how 
they differ  from categorical  grants,  and discusses past experiences  with block 
grants.  It outlines the implementation  difficulties  and recommends  how to make 
block grants  work on the national and State levels.  It includes a discussion  of 
national  goals,  accountability,  adequate funding,  regulatory  requirements,  program 
design and coordination,  administrative  systems,  and planning  and management. 
5.  Lawrence  D. Brown,  James W.  Fossett,  and Kenneth T.  Palmer,  The Charuzing 
Politics  of Federal  Grants,  The Brookings Institution,  1984. 
Abstract:  This book recounts  the history of the Federal  grant system since the 
Johnson Administration.  It explores  the growth of Federal  aid in the late  1960s 
and early  1970s and documents  the efforts of successive presidents  to rationalize 
the grant  system and reduce Federal  controls.  This book represents  the final 
chapter  in a major  Brookings Institution  effort to evaluate  the distributional,  fiscal, 
programmatic,  and political effects of Federal  grants.  It includes three essays: 
(1) Fossetts  essay synthesizes a series of case studies on the impact of Federal 
grants  on selected urban areas;  (2) Palmers  essay explores  the evolution  of Federal 
A-2  grant programs;  and (3) Browns essay assesses the politics  of devolution  of 
Federal  grants. 
6.  U.S.  General  Accounting  Office, Block  Grants: Federal-State  Cooperation  in 
Developing  Nationul  Data  Collection Strategies,  13RD-89-2, November  1988.  (This 
citation  and following  abstract provided  by the Public Health  Service. ) 
Abstract:  The GAO recommends  that in considering  future block grant data needs, 
the Congress  may want to statutorily  require  the Secretary  of Health  and Human 
Services to develop a mode for State data exchange  in consultation  with appropriate 
associations  of State and id  officials to facilitate uniform  data collection  under 
the community  services block grant. 
The GAO also recommends  that the Secretary  of Health  and Human  Services work 
with the States through the cooperative  data collection  efforts  to increase  data 
comparability  under the energy  assistance;  community  services;  and alcohol,  drug 
abuse,  and mental health services block grants. 
7.  U.S.  General  Accounting  Office, Developing  a Federal Drug Budget: Implementing 
the Anti-Dwg  Abuse Act  of 1988,  GGD-9OO1O4,August  1990.  (This citation  and 
following  abstract  provided  by the Public Health  Service.) 
Abstract:  There  is no requirement  that States provide  expenditure  data;  so there  is 
no way to determine  the exact amount of funds expended  on drug abuse,  alcohol 
abuse or mental  health.  The GAO concludes  that accounting  for agency 
expenditures  with sufficient precision  to asses programs  that Congress  considers 
significant,  such as anti-drug programs,  is an important  objective. 
Recommendation:  Agencies  with drug programs  be encouraged  to explore  options 
that will provide  better data with which to evaluate  the effectiveness  of their drug 
program  expenditures. 
8.  U.S.  General  Accounting  Office, Alcohol,  Drug Abuse,  and Mental  Health  Services 
Block  Grant: Womens Set-Aside Does Not Assure Drug  Treatment for  Pregnant  Women, 
HRD-91-80,  May  1991.  (This citation  and following  abstract provided  by the Public 
Health Service.) 
Abstract:  To better  assure that the Congress  is given a clear picture  of how the 
funds for the womens set-aside of the block grant is used,  GAO recommends  that 
the Secretary  of Health and Human  Services direct the Administrator  of the 
Alcohol,  Drug Abuse,  and Mental Health Administration  to specify annual 
reporting  requirements  for the States in a manner that allows for the national 
aggregation  of reported  data.,  States should be required  to report  on (1) all 
treatment  programs  for pregnant  women and women with children  and new or 
expanded  treatment  programs  or services  for women and (2) the number  of drug-
abusing pregnant  women and women with dependent  children. 
A-3  9.  U.S.  General  Accounting  Office, Alcohol,  Drug Abuse,  and Mental Health Services 
Bock  Grant: Drug  Treatment Services  Could be Improved  by New Accountability  Program, 
HRD-92-27,  October  1991.  (This citation  and following abstract  provided  by the Public 
Health  Service.) 
Abstract:  This report  indicates that the Federal  government  receives  limited 
information  on the results of the Federal  investment  in drug treatment  services. 
Although most of the States reviewed  monitor  administrative  processes,  their 
review  activities  have not provided  information  on the quality and appropriateness 
of drug treatment. 
The GAO recommends  that Congress  direct the Secretary  of Health and Human 
Services  to:  (1) establish reporting  requirements  for the States that will provide  the 
Department  with information  to determine  whether States are providing  drug 
treatment  program  and services  that are effective and (2) report to Congress  by 
1995 on the progress  of a State Systems Development  Program  initiated by the 
Department. 
10.  Michael  J. Rich,  Federal  Policymaking  and the Poor:  National  Goals.  Local 
Choices,  and Distributional  Outcomes,  Princeton  University  Press,  1993. 
Abstract:  This book examines  the relationship  between  Federal  decision-making

systems and the distributional  impacts  of public policies.  The analysis focuses on

the roles that Federal,  State,  and local officials play in determining  the uses of

Federal  funds,  and how,  if at all, these roles change over time.  The author

examines  two main questions:  (1) Are policy outcomes different  when Federal

officials--as  opposed to State and/or  local officials--have  greater  influence

regarding  the use of Federal  program  fi.mds?  (2) Do Federal,  State, and local

governments  differ in their responsiveness  to the needs of the poorest  citizens?

This study offers a theoretical  framework  for analyzing the Federal  grant system

with an emphasis  on experience  with the Community  Development  Block Grant

program.

Important  Points:

  The capacity  of governments  to target  Federal  funds to the poor vary greatly.

Government  officials at all levels tend to spread program  benefits widely as

opposed to concentrating  them where  needs are the greatest.

  Benefit coalitions  play an important  role in shaping Federal  program  outcomes.

Targeting  is greater  when strong coalitions  emerge  to press government  officials to

concentrate  funds on needyplaces  and to needy people.

  Benefit coalitions  that include a strong Federal partner  are more likely to be

successful  in obtaining targeted  policy  outcomes at the local level.

11.  Office of the Vice President,  Strengthening  the Partnership  in Intergovernmental 
Service Delivery,  National  Pe@ormunce Review,  September  1993. 
A-4
 Abstract:  This report  outlines the current  state of intergovernmental  relations  and 
Federal  grant making.  It recommends  how the Federal  grant system should 
allocate  money to States and localities.  This report  calls for a streamlined 
approach  to intergovernmental  partnership  through  a reduction  in the number  of 
categorical  grants and a decrease  in the amount of paperwork  required  for receipt 
of Federal  grants. 
Important  Points: 
	 Federal  mandates  and regulations  that accompany  grant programs  are cumbersome 
and costly to administer;  they lack a coordinated  implementation  strategy  between 
levels of government,  and are not achieving their intended  outcomes. 
	 States and localities have limited ability to customize  service delivery  by 
integrating  programs  because  of competing,  often conflicting,  Federal  rules that 
accompany  each grant program. 
	 Massive  reform  of the existing  system of intergovernmental  grant-making  is 
necessary.  Federal  grant programs  should be consolidated  into broad funding 
pools,  organized  around major  goals and desired  outcomes.  The goals should 
include:  streamlining  administrative  mechanisms,  providing  flexibility  to account 
for regional  differences  and the diversity  of needs,  ensuring  accountability  by 
measuring  performance  and outcomes,  and driving program  design and 
mamgement  down to the point of contact between government  and the consumer. 
	 The number  of categorical  grants should be reduced  and the Federal  government 
should work with States and localities to define a more viable Federal  partnership 
that balances  flexibility  and accountability. 
12.  Advisory  Commission  on Intergovernmental  Relations,  Characteristics  of Federal 
Grant-in-Aid  Programs  to State and Local  Governments:  Grants Funded  in FY 1993, 
January  1994. 
Abstract:  This report  is part of an ACIR series that has identified,  counted,  and 
examined  the characteristics  of Federal  grant-in-aid  programs  since  1975.  This 
report  is its most recent effort  to identify major changes  in the basic features  of the 
grant  system. 
Important  Points: 
  The total number  of Federal  grants to State and local governments  increased  from 
557 to 593 between  1991 and 1993. 
  Grant outlays rose to $206.4 billion in 1993 from $152 billion  in 1991, an increase 
of 36 percent. 
  The largest  number of new categorical  grants were in health,  education,  training, 
employment,  and social services. 
	 Measured  by outlays,  Federal  grants for health have expanded  more significantly 
than any other area,  rising from 9.1 percent  of the total  in FY  1975 to 
40.9 percent  in FY  1993. 
  There  were  15 block grants  in 1993 compared  to 578 categorical  grants. 
A-5
 	 More than 70 percent  of the money in the grant system has been distributed 
through  categorical  programs,  while about  10-15 percent  has been allocated  to 
block grants. 
  Categorical  grants continue  to be the main avenue of Federal  grant expansion. 
A-6
 THE  PARTNERSHIP  FOR  HEALTH  ACT 
13.  Leonard  Robins,  The Impact of Converting  Categorical  into Block Grants:  The 
Lessons from the 314(d) Block Grant in the Partnership  for Health Act,  Publius,  Winter 
1976, pp. 49-70. 
Abstract:  Data for this study were based primarily  on 51 state health officials 
survey responses  to a 21 page questionnaire  administered  during the spring and 
summer  of 1971.  All of the States responded  to either the letter,  the written 
questionnaire,  or the phone questionnaire. 
Important  Points: 
  The PHA increased  administrative  flexibility  for State health officials. 
  State health planning  agencies  did not have a major  influence  on the PHA.  State 
health planning  agencies  located  in governors  offices had even less influence  over 
the block grant. 
  Congress  did not significantly  increase expenditures  for the PHA,  as initially 
promised. 
  The PHAs  influence diminished  as new categorical  health programs  were created 
that logically  cotdd have been made part of the block grant. 
  The block grant did not result  in a reordering  of State spending priorities. 
	 The new administrative  flexibility  given State officials was insufficient to produce 
any substantive  reordering  of program  priorities. 
14.  Advisory  Commission  on Intergovernmental  Relations,  The Patinership for  Health 
Act:  Lessons from  a Pioneering Block  Grant, January  1977. 
Abstract:  This report  examines  the Partnership  for Health  Act of 1966 to 
determine  what lessons and insights it offers for the debate about block grants. 
Data for this study came from questionnaires  completed  by 50 State public health 
directors,  interviews  with State officials and representatives  of interest  groups,  and 
discussions  with academics  specializing  in intergovernmental  relations.  First,  the 
study reviews  the legislative  history of this block grant,  tracing  the emergence  of 
criticisms  of the categorical  approach  to health grants.  It includes an analysis  of 
the expectations  of consolidation  and the legislative  intent of this block grant. 
Second,  it explores  major features  of the Federal  administration  of the block grant: 
organizatioml  location,  staffhg,  and shifts in HEW and Administration  policy. 
Third,  it provides  an overview  of State administration  and decision-making  under 
the block grant  including:  patterns  of public involvement,  State flexibility,  and 
State expenditure  of block grant money.  Finally,  it concludes that the block grant 
is still the best intergovernmental  approach  to the public health area,  and 
recommends  that appropriately  structured  block grants replace  categorical  as the 
primary  Federal  funding mechanism.  The appendix  includes expenditure  tables 
and in-depth  analyses of six State case studies. 
A-7
 15.  Carl W.  Stenbergand  David B. Walker,  TheBlockG rant:  Lessons  from Two Early 
Experiments,  Publius,  Spring  1977. 
Abstract:  This article begins with a brief description  of the evolution  of the block

grant concept  andtien  identifies andcompares  the characteristics  of the instrument

with the realities  after almost  10 years of implementation  of the Partnership  for

Health  Act (PHA) and the Safe Streets Act.

Important  Points:

  The PHA ftmded a broad functional area at first,  but over time,  Congress

authorized  additional categorical  health programs  that detracted  from its flexible

servicing  goals.

  The PHAs  influence  and scope were curtailed  by its small fiscal magnitude  when

compared  to the aggregate  of Federal  public health grants or to the total  State-1ocal  ~

direct expenditures.

  The PHA increased  recipient  discretion  to the point where  State dominance

fostered  Federal  disinterest  in the block grant.

  The States were the dominant players  in the implementation  of PHA.

  The PHA served as a gap filler rather  than a launching pad for new initiatives.

16.  U.S.  General  Accounting  Office, Lessons Learned  From Past Block  Grants: 
Implications for  Congressional  Oversight,  IPE-82-8,  23 September  1982. 
Abstract:  This study examined  the five pre-1981  block grants--Partnership  for 
Health,  Omnibus Crime Control  and Safe Streets Act,  Comprehensive  Employment 
and Training  Act,  Community  Development  Block Grant,  and Title XX Social 
Services--and  compared  them to the provisions  of the OBRA 1981 block grants.  It 
focuses on:  (1) how block grants attempted  to balance  competing  goals of 
flexibility  and accountability,  (2) whether the poor and other disadvantaged  groups 
have been served equally under bIock grants and categorical  programs,  (3) whether 
block grants yielded  administrative  savings,  and (4) what evaluative  information 
has been available  to Congress under block grants. 
A-8
 OBRA  1981 BLOCK  GRANTS

17.  George Peterson,  etal.,  The Rea~an Block Grants,  The Urban Institute,  1986. 
Abstract:  This book examines  the impact of the seven health and human service 
block grants passed by Congress  in 1981.  It places  the block grants  in policy and 
budgetary  perspective  to extract  lessons for grant design after five years 
implementation  experience.  The data for this study are drawn from a survey of 
State spending and program  adjustments  in 18 States from FY 1981 through  FY 
1984.  Each chapter  is devoted to examining  a different  program  area and explores 
how the following  issues were affected by the shift from categorical  to block 
grants:  State versus national program  priorities,  State replacement  of funds, 
administrative  changes  after the block grant,  and State-1ocal relations. 
Important  Points: 
  The Maternal  and Child Health  (MCH) block grant gave States greater  flexibility 
to determine  program  priorities,  services,  and providers,  and at the same time 
allowed States to streamline  administrative  tasks.  This flexibility  was tempered  by 
Federal  funding cuts. 
  States made few significant  structural  changes  in response  to the MCH block grant. 
The most substantial  change was in the creation  of mini-blocks  delegating 
program  responsibility  to the local governments. 
  Despite  Federal  budget cuts, most States found the resources  necessary  in their 
own treasuries  to sustain MCH program  spending. 
  Although  State officials felt that consolidation  of categorical  programs  enhanced 
administrative  efficiency,  they could not provide  estimates  of administrative 
savings. 
  Almost all of the States surveyed  adjusted their Preventive  Health and Health 
Services  (PHHS) block grant program  mix. 
  States gave counties  greater  responsibility  for PHHS services and distributed  funds 
for these programs  more evenly across the State. 
  Some States found initial PHHS implementation  time consuming  and expensive,  but 
most reported  that the block grant eventually  lightened  their paperwork. 
  Because States often do not provide  PHHS services  themselves,  they provided  little 
information  about specific changes  in service delivery  under PHHS. 
  The Alcohol,  Drug Abuse,  and Mental Health Services  (ADMHS) block grant 
limited  some Federal-State  program  duplication. 
  The elimination  of the Federal  alcohol and drug reporting  requirements  enhanced 
the potential  for administrative  savings. 
  States did not take full advantage  of the flexibility  available  under the ADMHS 
block grant. 
A-9
 18.  U.S.  General Accounting  Office,  Maternal  and Child Heaith Block  Grant:  Program 
Changes Emerging  Understate  Administration,  HRD-84-35,  7 May  1984. 
Abstract:  This report  is part ofthe  GAO series that looked at13  States 
experiences  with block grant implementation.  It focuses on the Maternal  and Child 
HeaIth block grant which consisted  of eight former categorical  programs. 
Important  Points: 
  St&es continued  to support programs  similar to those funded under  the former

categorical  programs.

  States assigned higher priority  to programs  in areas where they had considerable

previous  involvement.

  Due to Federal  budget cuts,  States shouldered  a greater  share of the program  funds

in order  to maintain  services.

  States health agencies  carried  out block grant responsibilities,  and some reported

management  improvements  as a result of the block grant.

  Most State officials rated the block grant more flexible  and desirable  than

categorical.

  About half the interest  groups surveyed preferred  the prior categorical  approach  to

the block grant.

19.  U.S.  General  Accounting  Office,  States  Use Added Flexibility  Oflered by the 
Preventive  Health  and Health  Services Block  Grant, HRD-84-41,  8 May  1984. 
Abstract:  This report  is part of the GAO series that looked at 13 States 
experiences  with block grant implementation.  It focuses on the Preventive  Health 
and Health  Services block grant which consolidated  seven former  categorical 
programs  into one block. 
Important  Points: 
  While PHHS accounted  for less than 3 percent  of States total health budgets,  it

represented  about 30 percent  of financing for broader  State preventive  health

programs.

  Carryover  funds from former  categorical  programs  helped offset the reduced

Federal  funding for PHHS.

  The services  offered under the PHHS block grant were essentially  the same as

those fimded under  prior  categorical  programs.

  States slightly modified  program  priorities  to better  reflect their concerns.

  Changes  at the service provider  Ievel were not directly  linked to the shift from

categorical  to block grant fimding.  They may have been influenced by escalating

costs and changes  in other sources of funding.

  States successfully  carried  out their expanded management  role.

  States increased  public participation  and involvement  of State elected  officials.

  State executive  and legislative  officials liked the increased  flexibility  of block

grants and preferred  them to the prior  categorical  approach.

  Most interest  groups preferred  the categorical  approach  over block grants.

A-10  	 All groups  surveyed believed that the advantages  of block grants were tempered  by 
the Federal  fimding cuts. 
20.  U.S.  General  Accounting  Office,  States Have Made Few Changes in Implementing 
the Alcohol,  Drug Abuse,  and Mental  Health Services Block  Grant, HRD-84-52,  6 June 
1984. 
Abstract:  This report  is part of the GAO series that looked at 13 States 
experiences  with block grant implementation.  It focuses on the Alcohol,  Drug 
Abuse,  and Mental Health  Services (ADMHS) block grant that consolidated 
10 categorical  programs  into one block. 
Important  Points: 
  Carryover  funds from previous  categorical  grants mitigated  Federal  funding cuts

and allowed  States to sustain service  levels into 1982.

  Program  changes  occurred  at the service provider  level,  but were attributed  to

evolving community  needs or changes in total funding rather  than the shift to the

block grant approach.

  State agencies  carried  out their expanded  management  responsibilities  and reported

implementing  administrative  improvements.

  States reported  increased  involvement  by legislatures  and governors  offices and

sought public  input through  hearings.

  State officials rated the block grant program  as more desirable  than the categorical

approach.

  Half of the interest groups  surveyed preferred  the prior  categorical  approach  over

the block grants.

21.  U.S.  General  Accounting  Office, Block  Grants Brought Funding  Changes and 
Adjustments  to Program Priorities,  HRD-85-33,  11 February  1985. 
Abstract:  This report  is part of the series of GAO studies that looked at 13 States 
experience  with block grant  implementation.  It examines  how States used their 
expanded  decision-making  authority  and reacted to changes  in the level of Federal 
finding. 
Important  Points: 
  States obtained  greater  decision-making  authority  to set program  priorities  and 
determine  the use of funds than they had under the categorical  programs. 
  States increased  programmatic  discretion  was tempered  by requirements  that they 
continue to find  the same grantees  as under categorical. 
  States took advantage  of available carryover  funds from the prior  categorical  funds 
to mitigate  the Federal  funding reductions. 
  States exercised  their new discretion  to transfer  funds among block grants. 
	 To maintain  service levels,  States increased  the use of their own funds to replace 
Federal  funding cuts. 
A-11
   Program  areas that were funded under  the categorical  programs  continued  to 
receive  support under the block grants. 
  Some minor  changes  in funding patterns  emerged  as States began to put their 
imprint  on program  priorities. 
22.  U.S.  General  Accounting  Office,  State Rather than Federal Policies Provided  the 
Framework for  A4anaging Block  Grants, HRD-85-36,  15 March  1985. 
Abstract:  This report  is part of the GAO series that looked at 13 States 
experiences  with block grant  implementation.  It describes  trends in States 
planning  and management  of block grant programs. 
Important  Points: 
  Decisions  on how to use block grants  were linked to broader  decisions on related

State programs  for health.

  More than half of the State program  officials reported  that block grants led to

improvements  in planning  and budgeting,  and increased  their flexibility  to better

allow them to integrate  Federal  and State activities.

  Some States consolidated  offices or integrated  service delivery under related

programs--particularly  under the ADMHS block grant.

  Due to their prior  involvement  in categorical  health programs,  States generally  did

not change  their levels of monitoring  when they shifted to block grants.

  States were given discretion  to determine  the form and content of block grant data

collected.  As a result,  the information  reported  to the Federal  government  was

inconsistent  across the States and difilcult  to evaluate.

  States in 68 percent  of cases reported  that block grants reduced  the time and effort

devoted  to Federal  applications  and reporting.  Sixty-seven percent  of States

surveyed  claimed  that block grants prompted  them to standardize  or alter their

administrative  procedures.

23.  U.S.  General  Accounting  Office,  Block  Grants: Overview of Experiences  to Date and 
Emerging Issues,  HRD-85-46,  3 April  1985. 
Abstract:  This report  is part of the series of GAO studies examining  block grant 
implementation  in 13 States.  This report  assesses whether the objectives  of block 
grants  were met through  implementation.  The goals of block grants were:  (1) to 
focus program  responsibility  and management  accountability  with States,  (2) to 
increase  public  involvement  in the decision-making  process,  (3) to improve  service 
delivery  through  better integration  of Federal  and State programs,  and (4) to 
promote  mamgement  improvements  and save money. 
A-12
 Important  Points: 
  States adapted quickly to their new role due to their prior  involvement  with many 
of the categorical  programs. 
  All of the States surveyed used hearing  and comment  processes  to obtain public 
input. 
  Initially,  States emphasized  program  continuity,  but over time changes emerged. 
  States reported  management  improvements  prompted  by the block grants.  . 
  Administrative  savings cannot be determined  due to the dearth  of information. 
  More than half of the interest groups surveyed preferred  the categorical  approach 
over block grants. 
  Eighty percent  of governors,  State legislators,  and State program  officials believed 
that the block grant approach  was more desirable. 
24.  Richard  P.  Nathan and Fred C. Doolittle,  Federal Grants:  Giving and Taking 
Away,  Political  Science  Quatierly,  Vol.  100, No.  1, Spring  1985. 
Abstract:  This article examines how State and local governments  respond  to 
Federal  aid policy changes with an emphasis  on the OBRA 1981 block grants.  It 
offers  some generalizations  about the conditions under which Federal  aid 
replacement  is most likely to occur. 
Important  Points: 
	 Replacement  is most likely to occur when the community  ideology is pro-spending 
and the fiscal condition  of the jurisdiction  is strong enough to replace  Federal 
funding cuts. 
	 Federally  aided programs  most likely to benefit by replacement  are those with 
traditional  or longstanding  State and local involvement  that have a politically  strong 
constituency.  For example,  health programs  did better  in these terms  than other 
programs  for the poor. 
  There  was more replacement  at the State level than at the local level. 
  There  is a strong tendency for recipient  governments  to resist using Federal  aid to 
substitute  for their own funds because of fear of sanctions. 
25.  U.S.  General  Accounting  Office,  Block  Grants: Characteristics,  Experience,  and 
Lessons Learned,  HEHS-95-74,  February  1995. 
Abstract:  This report  summarizes  information  on federal block grant programs, 
assesses the experience  of States operating under them and identifies  lessons 
learned  that can be useful to the Congress as it considers  creating  a new set of 
block grants. 
Important  Points: 
	 OBRA of 1981 created  nine block grants from about 50 categorical  programs.  The 
fi.mding and other federally  imposed requirements  attached to the block grants  were 
generally  viewed by States as less onerous than under the displaced  categorical 
programs. 
A-13  	 Where  States had operated  programs,  the transition  from categorical  programs  to 
block grants  was smoother. 
	 States took a variety  of approaches  to help offset the overall  federal funding 
reductions  experienced  when the categorical  programs  were consolidated  into the 
1981 block grants. 
	 Funding  allocations  based on distributions  under prior  categorical  programs  may be 
inequitable  because they do not reflect  need,  ability to pay,  and variations  in the 
cost of providing  services. 
  Even though block grants were  intended to provide  flexibility  to the States,  over 
time constraints  were added which had the effect of recategorizing  them. 
  The Congress  needs to focus on accountability  for results,  and the Government 
Performance  and Results Act may provide  such a framework. 
	 New block grant proposals  include programs  that are much more expansive than 
block grants created  in 1981 and could present  a greater  challenge  for the States to 
both implement  and finance. 
	 Today,  a total of 15 block grants are in effect.  Compared  with categorical  grants, 
which number  578, there are far fewer block grants. 
A-14
 APPENDIX  B 
COMMENTS  ON  THE DRAFT  REPORT 
In this appendix,  we present  in fill  the comments we received  from the Public Health 
Service. 
B-1  *.9  $,awcr, 
4% 
J?8   L  DEPARTMENTOF ~EALTH& HUMANSERVICES  Public Health  sem~e 
i 
N,h,a 
Washington  DC  Z(MOI 
Jm  141995 
TO:  Inspector  General,  OS 
FROM:  Assistant  Secretary  for  Health 
SUBJECT :	 Office  of  Inspector  General  (OIG)  Draft  Report  Federal 
Approaches  to  Funding  Public  Programs,  (OEI-01-94-00160 
Attached  are the Public  Health  Se~ice  comments  on the Subject 
report.  We concur  with  the reports  recommendation.  Our 
response  describes  the action  that we have  taken or plan  to take 
to implement  this  recommendation, 
@&&

L-
Philip R. Lee, M.D.

Attachment

B-2
 PUBLIC  HEALTH  SERVICE  (PHS 1 COMMENTS  ON THE OFFICE  OF 
REPORT I?EDEIWL APPROAC13ESTO 
ZNSPECTOR  GENERAL  (OIGI DRAFT 
FUNDIZ?GPUBLIC  GI#MSr   OEX-01-94-00160 
OIG Recommendation 
The Publlc  Health  Se~ice  should  develop  a strategy  to use

performance  Lndi.caters  in  ways  that  will  allow  grantees

substantial  discretion  i.n  using  Federal  funds  and?  at  the  same

time,  held  them  sufficiently  accountable  for their

performance.

PHS Co~ent

We concur.  In  December  1994  the  PHS began  to  develop  a  new 
form  of  grant  program  with the potential  to  bring  about  major 
changes  i.rt  l?ecieral-State  relationships.  It  was  des~gned  to 
move  the  focus  of funding  to allow  for much  gzeater

flexibility  on the part of States  to coordinate and target

resources  to meet  local needs,  while  providing  for

accountability  for the results  of State  expenditures  using

Federal  funds  and insuring  that  broad  Federal  priorities  are

addre6sed.  This  program,  entitled  Performance  Partnershf.p

Grants,  has  been proposed  to Congress  as a way  of

consolidating  existing  categorical  and block  grant  programs

related  to substance  abuse,  mental  health  semices  for adults

with  serious  mental  illness  and children  with  serious

emotional  disturbances,  immunization,  AIDS/TB/sexually

transmitted  diseases,  chronic  diseases,  and preventive

services.

In addition,  the Health  Resources  and Services  Administration

(HRSA) has an initiative  underway  to establish  and utilize

performance  measures  to demonstrate  the effectiveness  Of

programs  whether  they are  funded  through  the categorical  or

block  grant  mechanism,  The HRSA  is presently  evaluating

measurable  goals  of performance  that can be reported  as a part

of the budgetary  process  for the clusters  and  other  program

activities  within  the agency.  It is expected  that this will

result  i.nan association  of funding  decisions  with  explicit

performance  indicators.

Technical  Comments

We offer  the  following  technical  comments  for OIGS

consideration.

Paae  2, third  paraaraph,  third  sentence  states  that  the

Presidents  Fiscal  Year  1996 Budget  proposed  that  50 programs

in the Health  Resources  and Services  Administration  be lumped

into  3.  This  should  be corrected  to state  that  50 programs

be lumped  into  9,

B-3
 Paae  5, uaraurauh  followina  first bullet:  Block  grant 
spending  in  1993  is  given  in 1975  constant  dollars  as 
$17.6  billion.  It could be useful,  especially  for non-
economists,  to show this  amount  also in 1993 actual  dollars

($32 billion).

B-4
 APPENDIX  C 
ENDNOTES 
1.  Office of the Vice President,  Strengthening  the Patinei-ship in Intergovernmental 
Service Delivery,  Washington,  DC,  1993. 
2.	 Michael  Reagan and Jon Sanzone,  The New Federalism,  Oxford  University  Press, 
1981, p. 57. 
3.  Advisory  Commission  on Intergovernmental  Relations  (ACIR),  Characteristics  of 
Federal  Grant-in-Aid  Programs to State and Local  Governments:  Grants Funded FY 
1993, January  1994. 
4.  Ibid. 
5.  Ibid. 
6.  Ibid.,  pp. 1-7.  In actual dollars,  the 1993 total was $32 billion. 
7.  ACIR,  The Partnership for  Health Act:  Lessons from  a Pioneering  Block  Grant, 
January  1977, p. 5. 
8.  ACIR,  Improving  Grants Management,  February  1977, p. 3. 
9.  ACIR,  Block  Grants:  A Comparative Analysis,  October  1977, p. 6. 
10.  ACIR,  Summary and Concluding  Observations  on the Intergovernmental  Grant 
System,  June  1978, p. 40. 
11.  ACIR,  Zle  Pan?nershipfor  Health Act:  Lessons From a Pioneering  Block  Grant, 
January  1977. 
12.  Ibid.,  p,6. 
13.  ACIR,  Summqand  Concluding  Obsewations  onthe  Intergovernmental  Granl 
System,  June  1978, p. 4. 
14.  Michael J. Rich,  Federal  Policymaking  and the Poor:  National  Goals,  Local Choices. 
and Distributional  Outcomes,  Princeton  University  Press,  1990. 
15. ACIR,  Fiscal Balance,  1977, p. 153. 
16.  Michael  J. Rich,  Federal  PolicvmakinE and the Poor:  National  Goals.  Local 
Choices,  and Distributional  Outcomes. 
17.  Reagan  and  Sanzone,  The New Federalism,  p. 79, 
c-1  18.  ACIR,  Sum~qand  Concluding  Obsewations  onthe  Intergovernmenlai  Grant 
System,  June  1978, p. 4. 
19.  ACIR,  Improving  Federal  Gran~sManagement,  February  1977, p. 3. 
20.  ACIR,  Summqand  Concluding  Obsewations  onthe  Intergovernmental  Grant 
System,  June  1978, p.  6. 
21.  Ibid. 
22.  ACHl,  l%e PatinershipforHealth  Act:  Lessonsfiom  a Pioneering  Block  Grant, 
January  1977, p.6. 
23.  Carl W.  Stenbergand  David B. Walker,  TheBlockG rant:  Lessons from Two 
Early  Experiments,  Publius,  Spring  1977. 
24.  ACHl,  The Partnership for  Health Act:  Lessons jioma  Pioneering  Block  Grant, 
January  1977. 
25.  George  Peterson,  etal.  The Rea~an Block Grants,  The Urban Insti~te,  1986, 
p. 3. 
26.  Reagan  and Sanzone,  The New Federalism,  p.  128. 
27.  Ibid.,  p.  122. 
28.	 Claude  E. Barfield,  Rethinking  Federalism:  Block Grants  and Federal.  State.  and 
Local Res~onsibilities,  American  Enterprise  Institute,  1981, pp. 20-21. 
29.  George Peterson,  etal.,  The Rea~an Block Grants,  The Urban Institute,  1986, 
p. 4. 
30.  Ibid. 
31.  Ibid.,  pp.  28-29. 
32.  Department  of Health  and Human  Services,  Administration  for Children  and 
Families,  SumnuwyofActionson  Waiver Applications,  1994. 
33.  Claude E.  Batileld,  Rethinkin~  Federalism,  p. 44. 
34.  U.S.  General  Accounting  Office,  Block  Grants:  Overview of fiperiences  to Date 
and Emerging  Zssues, HRD-85-46,  3 April  1985, pp.  17-21. 
35.  ACIR,  Block  Grants:A  ComparativeAnalysis,  October  1977. 
36.  U.S.  General  Accounting  Office,  State Rather  Than Federal Policies Provided  the 
Framework fori14anaging  Block  Grants, HRD-85-36,  15 March  1985, pp. 44-46. 
c-2
 37.  U.S.  General  Accounting  Office,  States Have Made Few  Changes in Implementing 
the Alcohol,  Drug Abuse,  and Mental  Health Services Block  Grant, ERD-84-52,  6 June 
1984, pp. 43-44. 
38.  Ibid. 
39.	 U.S.  General Accounting  Office,  Matemland  Child Health Block  Grant:  Program 
Change  sEmerging Under State Administration,  HRD-84-35,7  May  1984. 
40.  George  Peterson,  et al.,  The Rea~an Block Grants. 
41.  Ibid.,  p.  118, 
42.  U.S.  General  Accounting  Office,  States  Use Added Flexibility  O#ered @the 
Preventive  Health  and Health  Sewices  Block  Grant, H~-84-41,8  May  1984, p.  57. 
43,  George  Peterson,  etal.,  The Rea~an Block Grants,  p.  118. 
44.  U.S.  General  Accounting  Office, Lessons Learnedfiom  Past Block  Grants: 
Implications for  Congressional  Oversight,  IPE-82-8,  23 September  1982, p.  64. 
45.	 ACIR,  The Partnership for  Health Act:  Lessons fioma  Pioneering  Block  Grant, 
1977. 
46.  Ibid.,  pp.  150,  192. 
47.  U.S.  General  Accounting  Office, Lessons Learned From Past Block  Grants: 
Implications for  Congressional  Over;ight,  IPE-82-8,  23 September  1982, p.  54. 
48.  Claude E. Barfleld,  Rethinkiruz Federalism,  p.  35. 
49.  George  Peterson,  et al.,  The Rea~an Block Grants,  1986, p.  1. 
50.  Ibid.,  p.  24. 
51.  Department  of Health and Human  Services,  Office of Inspector  General,  Services 
Integration:  ATwenty  Year Retrospective,  0EI-Ol-91-00580,  January  1991. 
52.  ACIR,  The Partnership for  Health Act:  Lessons from  aPioneering  Block  Grant, 
January  1977, p.  88. 
53.  ACIR,  Summaqand  Concluding  Observations,  June 1978. 
54.  Zbid., pp.  126-127. 
55.  George  Peterson,  et al.,  The Rea~an Block Grants. 
56.	 U.S.  General  Accounting  Office, Maternal  and Child Health Block  Grant:  Program 
Changes Emerging  Under State Administration,  HRD-84-35,  7 May  1984, p.9. 
c-3  57.  U.S.  General  Accounting  Office,  States  Use Added  Flexibilip  Ofered  by the 
Preventive  Health and Health Services Block  Grant, IIRD-84-41,  8 May  1984, p.  8. 
58.  ACIR,  77zePartnership for  Health Act:  Lessons fioma  Pioneering  Block  Grant, 
January  1977, p.  80. 
59.  Ibid. 
60.	 Leonard  Robins,  ''The Impact of Converting  Categorical  into Block Grants:  The 
bssomfrom  tie314(d)  Block Grant  inthe  Patinership  for Healti  Act,''  Publius,  Winter 
1976, p.  67. 
61.  Ibid. p.68. 
62.  Claude E. Barlleld,  Rethinking  Federalism,  p. 44. 
63.  U.S.  General  Accounting  Office,  Block  Grants Brought Funding  Changes and 
Adjustments  to Program Priorities,  HRD-85-33,  11 February  1985. 
64.  Ibid.,  p.1. 
65.	 U.S.  General Accounting  Office,  Maternal  and Child Health Block  Grant:  Program 
Changes Emerging  Understate  Administration,  HRD-84-35,7  May  1984, p. 43. 
66.  George  Peterson,  et al.,  The Rea~an Block Grants,  1986, p.  17. 
67.  Ibid.,  p.  116. 
68.  Ibid. 
69.	 George Peterson,  etal.,  The ReaEan Block Grants,  The Urbm  Instimte,  1986, pp. 
124-128. 
70.  U.S.  General  Accounting  Office, Lessons Learnedfiom  Past Block  Grants: 
Implicationsfor  Congressional Oversight,  IPE-82-8,  23 September  1982, pp. 73-74. 
71.  ACIR,  l%e Patinershipfor  Health Act:  Lessonsfiom  a Pioneering  Block  Grant, 
January  1977, p.  127. 
72.  George Peterson,  et al.,  The Rea~an B1ock Grants. 
73.  Richard  P. Nathan  and FredC.  Doolittle,  FederalGrants:  Giving and Taking 
Away,  Political  Science  Quarterly,  Vol.  100, No.  1, Spring  1985. 
74.	 ACIR,  Summ.aq  and Concluding  Observations  on the Intergovernmental  Grant 
System,  June  1978, p. 40. 
75.  Ibid.,  p.41. 
c-4  76.  Richard  Nathan,  StateandLocalG  overnmentsU  nderFederalG  rants,  Political

Science  Quanerly,  Vol.  98.,  No.  1, Spring  1983.

77.  Nathan and Doolittle,  FederalGrants:  Giving and Taking Away.

78.  Nathan,  State and Local Governments  Under FederaI Grants. 

79.  Stenberg  and Walker,  The Block Grant:  Lessons from Two Early Experiments, 

p.  37.

80.  Ibid.,  p.56.

81.  U.S.  GeneralAccounttig  Office,  Lessons Learned from  Pat  Block  Grants:

Implications for  Congressional  Oversight,  IPE-82-8,  23 September  1982, p. 34.

82.  Ibid.

83.  George  Peterson,  et al.,  The Reagan  Block Grants,  p.  18.

84.  ACIR,  Zbe Partnership for  Health Act:  Lessons from  a Pioneering  Block  Grant,

January  1977, p. 98.

85.  George  Peterson,  The Reagan Block Grants,  p. 20.

86.  U.S.  General Accounttig  Office,  Block  Grants Brought Funding  Cbnges  and

Adjustments  to Program  Priorities,  HRD-85-33,  11 February  1985, p. 48.

87.  Ibid.,  p. 49.

88.  Ibid.

89.  Ibid.,  p.50.

90.  Atthebeginning  ofthis  report,  wenoted  the Vice Presidents  National  Performance

Review,  theincreaskg  number  of Stiterequests  for Federal  waivers,  and the 1994

political  campaigns  and elections  as such forces.  To those might be added broader  forces

such as (1) the widespread  movement  in corporations  to reduce  central  planning and

management  staffs while delegating  additional  authority  and responsibility  to the front

lines and (2) the information  technology  revolution  which makes it increasingly  possible to

make such delegations  while top management  can stay attuned to the performance  of the

organization  on a real-time  basis.

c-5