Block Grants: Perspectives and Controversies
Released: 2014-07-15T00:00:00

Summary:
Block grants are a form of grant-in-aid that the federal government uses to provide state and local governments a specified amount of funding to assist them in addressing broad purposes, such as community development, social services, public health, or law enforcement.
Block grant advocates argue that block grants increase government efficiency and program effectiveness by redistributing power and accountability through decentralization and partial devolution of decision-making authority from the federal government to state and local governments. Advocates also view them as a means to reduce the federal deficit. For example, Representative Paul Ryan, chair of the House Committee on the Budget, has recommended that the federal share of Medicaid be converted into a block grant "tailored to meet each state's needs" as a means to improve "the health-care safety net for low-income Americans" and to save $732 billion over 10 years.
Block grant critics argue that block grants can undermine the achievement of national objectives and can be used as a "backdoor" means to reduce government spending on domestic issues. For example, opponents of converting Medicaid into a block grant argue that "block granting Medicaid is simply code for deep, arbitrary cuts in support to the most vulnerable seniors, individuals with disabilities, and low-income children." Block grant critics also argue that the decentralized nature of block grants makes it difficult to measure block grant performance and to hold state and local government officials accountable for their decisions.
Block grants, which have been a part of the American federal system since 1966, are one of three general types of grants-in-aid programs: categorical grants, block grants, and general revenue sharing. These grants differ along three dimensions: the range of federal control over who receives the grant; the range of recipient discretion concerning aided activities; and the type, number, detail, and scope of grant program conditions.
Categorical grants can be used only for a specifically aided program and usually are limited to narrowly defined activities; legislation generally details the program's parameters and specifies the types of funded activities. There are four types of categorical grants: project categorical grants, formula-project categorical grants, formula categorical grants, and open-end reimbursement categorical grants.
Project categorical grants and general revenue sharing represent the ends of a continuum on the three dimensions differentiating grant types, with block grants being at the mid-point. However, there is some overlap among grant types in the middle of the continuum. For example, some block grants have characteristics normally associated with formula categorical grants. This overlap, and the variation in characteristics among block grants, helps to explain why there is some disagreement concerning precisely what is a block grant, and how many of them exist.
This report provides an overview of the six grant types, provides criteria for defining a block grant and uses those criteria to provide a list of current block grants, examines competing perspectives concerning the use of block grants versus other grant mechanisms to achieve national goals, provides an historical overview of the role of block grants in American federalism, and examines recent changes to existing block grants and proposals to create new ones.

subsections: section_title: Introduction
paragraphs: Block grants have been a part of the American federal system since 1966. They are one of three general types of grants-in-aid programs: categorical grants, block grants, and general revenue sharing. These grants differ along three dimensions: the range of federal control over who receives the grant; the range of recipient discretion concerning aided activities; and the type, number, detail, and scope of grant program conditions.
Categorical grants can be used only for a specifically aided program and usually are limited to narrowly defined activities; legislation generally details the program's parameters and specifies the types of funded activities. There are four types of categorical grants: project categorical grants, formula-project categorical grants, formula categorical grants, and open-end reimbursement categorical grants. There are currently 1,078 categorical grants.
Block grants are a form of grant-in-aid that the federal government uses to provide state and local governments a specified amount of funding to assist them in addressing broad purposes, such as community development, social services, public health, or law enforcement. Although legislation generally details the program's parameters, state and local governments are typically provided greater flexibility in the use of the funds and are required to meet fewer administrative conditions than under categorical grants. There are currently 21 funded block grants, totaling about $50.8 billion in FY2014 (less than 10% of total federal grant-in-aid assistance).
General revenue sharing provides state and local governments funds that are distributed by formula, accompanied with few restrictions on the purposes for which the funding may be spent, and have the least administrative conditions of any federal grant type. The general revenue sharing program is no longer operational. It distributed funds to states from 1972 through 1980 and to local governments from 1972 through 1986.
Project categorical grants and general revenue sharing represent the ends of a continuum on the three dimensions differentiating grant types, with block grants being at the mid-point. However, there is some overlap among grant types in the middle of the continuum. For example, some block grants have characteristics normally associated with formula categorical grants. This overlap, and the variation in characteristics among block grants, helps to explain why there is some disagreement concerning precisely what is a block grant, and how many of them exist.
Block grant advocates view block grants as a means to increase government efficiency and program effectiveness by redistributing power and accountability through decentralization and partial devolution of decision-making authority from the federal government to state and local governments. They also view them as a means to reduce government expenditures without sacrificing government services. For example, Representative Paul Ryan, chair of the House Committee on the Budget, has recommended that the federal share of Medicaid be converted into a block grant "tailored to meet each state's needs" as a means to improve "the health-care safety net for low-income Americans" and to save $732 billion over 10 years. Also, the House-passed FY2013, FY2014, and FY2015 Concurrent Budget Resolutions ( H.Con.Res. 112 , H.Con.Res. 25 and H.Con.Res. 96 ) proposed converting Medicaid from an open-ended, individual entitlement formula categorical grant into a block grant. The report accompanying the House's FY2015 Concurrent Budget Resolution estimated that converting Medicaid to a block grant would save $732 billion over 10 years.
Block grant critics argue that block grants can undermine the achievement of national objectives and can be used as a "backdoor" means to reduce government spending on domestic issues. They also claim that the decentralized nature of block grants makes it difficult to measure block grant performance and to hold state and local government officials accountable for their decisions.
This report provides an overview of the six grant types, provides criteria for defining a block grant and uses those criteria to provide a list of current block grants, examines competing perspectives concerning the use of block grants versus other grant mechanisms to achieve national goals, provides a brief historical overview of the role of block grants in American federalism, and examines recent changes to existing block grants and proposals to create new ones.
section_title: Grant Definitions
paragraphs: Different federal departments and agencies, including the U.S. Census Bureau, the Government Accountability Office (GAO), and the U.S. Office of Management and Budget (OMB), use different definitions to determine what counts as a federal grant-in-aid program. However, there is agreement on the general characteristics associated with each grant type.
Of the six grant types, project categorical grants typically impose the most restraint on recipients (see Table 1 ). Federal administrators have a high degree of control over who receives project categorical grants (recipients must apply to the appropriate federal agency for funding and compete against other potential recipients who also meet the program's specified eligibility criteria); recipients have relatively little discretion concerning aided activities (funds must be used for narrowly specified purposes); and there is a relatively high degree of federal administrative conditions attached to the grant, typically involving the imposition of federal standards for planning, project selection, fiscal management, administrative organization, and performance.
General revenue sharing imposes the least restraint on recipients. Federal administrators have a low degree of discretion over who receives general revenue sharing (funding is allocated automatically to recipients by a formula or formulas specified in legislation); recipients have broad discretion concerning aided activities; and there is a relatively low degree of federal administrative conditions attached to the grant, typically involving periodic reporting criteria and the application of standard government accounting procedures.
Block grants are at the midpoint in the continuum of recipient discretion. Federal administrators have a low degree of discretion over who receives block grants (after setting aside funding for administration and other specified activities, the remaining funds are typically allocated automatically to recipients by a formula or formulas specified in legislation); recipients have some discretion concerning aided activities (typically, funds can be used for a specified range of activities within a single functional area); and there is a moderate degree of federal administrative conditions attached to the grant, typically involving more than periodic reporting criteria and the application of standard government accounting procedures, but with fewer conditions attached to the grant than project categorical grants. 
In practice, some block grants have from their inception offered programmatic flexibility within a narrow range of activities. Others started out with few program restraints, but, over time, have become "re-categorized" as Congress has chosen to limit state and local government programmatic flexibility by imposing additional administrative and reporting requirements, typically to augment congressional oversight. For example, in its examination of 11 block grants in 1995, GAO found that in 9 of the 11 block grants Congress added new cost ceilings and set-asides or changed existing ones 58 times:
These constraints often took the form of set-asides, requiring a minimum portion of funds to be used for a specific purpose, and cost-ceilings, specifying a maximum portion of funds that could be used for other purposes. This trend reduced state flexibility. Many of these restrictions were imposed because of congressional concern that states were not adequately meeting national needs.
Congress has also increased programmatic flexibilities for some categorical grants, making them look increasingly like block grants. This blurring of characteristics can present challenges when analyzing the federal grants-in-aid system, as agencies and researchers may disagree over definitions and, as a result, reach different conclusions about block grants and their impact on American federalism and program performance. This blurring of characteristics should be kept in mind whenever generalizations are presented concerning the impact various grant types have on American federalism and program performance.
section_title: The Number of Block Grants
paragraphs: Congress has a central role in shaping the scope and nature of the federal grants-in-aid system. In its deliberative, legislative role, Congress determines its objectives, decides which grant mechanism is best suited to achieve those objectives, and creates legislation to achieve its objectives, incorporating its chosen grant mechanism. It then exercises oversight to hold the Administration accountable for grant implementation and to determine whether the grant is achieving its objectives.
The following criteria were used to determine the current number of block grants: 
eligibility is limited to state and local governments (not foreign governments or nongovernmental organizations); program funds are typically distributed using a formula that may be prescribed in legislation or regulations; and unlike categorical programs, which target funds for a specific activity, recipients undertake, at their discretion, a number of activities within a broad functional category aimed at addressing national objectives.
Most of the 23 block grants (21 funded and 2 authorized, but not currently funded) identified in Table 2 award funding to state governments. Block grants that provide funding to local governments, including sub-state regional entities, either directly or through "pass-through" provisions, are identified in the table.
Given disagreements over definitions, the list of block grants presented in Table 2 should be considered illustrative, as opposed to definitive, of the present number of block grants.
section_title: Block Grants: Competing Perspectives
paragraphs: A federalism scholar has suggested that efforts to enact block grants typically have been based on the following arguments:
the national government was too large, and its elected officials and appointed officials were out of touch with grassroots needs and priorities; the federal bureaucracy was too powerful and prone to regulation; the United States Congress was too willing to preempt states and localities and to enact mandates without sufficient compensatory funding; the national government was too involved in domestic activities that were properly state or local affairs; there were too many narrow, overlapping federal grant-in-aid programs; and state governments were too often considered mere administrative subunits of the national government rather than the vital "laboratories of democracy" envisioned by Justice Louis Brandeis. 
He also suggested that efforts to enact block grants often met resistance in Congress because of congressional concerns about recipients' management capacity and commitment to the program, recipients' ability to make the "right" allocation choices, and the possibility that converting categorical grants to block grants might diminish both congressional and executive branch ability to provide effective program oversight. He also argued that Congress had a tendency to prefer categorical grants over block grants because they provide greater opportunity for receiving political credit.
Another federalism scholar also suggested that block grant advocates have often found it difficult to gain congressional approval for block grants because their arguments have been superseded by political considerations:
Why is it so difficult to do block granting? Why is it politically hard? And I think the answer's pretty straightforward: it seldom has more friends than it has enemies. Liberals prefer a categorical approach to intergovernmental grant giving. Essentially for two reasons: First of all, it locks in - it institutionalizes constituencies; that is, it sets up a pretty sturdy relationship between client groups; program authorizing committees in Congress; and patron agencies in the Executive Branch. And this pretty much ensures that intended target populations get funded, consistently. 
But, secondly, unlike block grants, which are often administered by formula, the categorical system gives politicians more opportunities for credit claiming. I'm going to quote, here from Yale political scientist David Mayhew on this subject. He says, "The categorical grant is for modern Democratic Congressmen what the Rivers and Harbors Act and the tariff were for pre-New Deal Republican Congressmen."
That's true, but when the chips were down, conservatives are often not that keen about block granting, either.... They may like the fact that it may be somewhat easier to trim program spending, once programs are taken out of their political silos or cease to be entitlements. But they don't necessarily like the total lack of accountability, the absence of any strings to the money, once it goes out to the states.
The following discussion examines in more detail the arguments presented by block grant advocates and block grant critics.
Block grant advocates argue that federal administrators are often out of touch with grassroots needs and priorities whereas state and local government officials are "closer to the people" than federal administrators and, therefore, are better positioned to identify state and local government needs. They also argue that state and local government officials are more "visible" to the public than federal administrators and, as a result, are more likely to be held accountable for their actions. From their perspective, this heightened level of visibility and accountability encourages state and local government officials to seek the most efficient and cost-effective means to deliver program services. As a result, they view the added flexibility provided by block grants as a means to produce both better programmatic outcomes and at a lower cost. Block grant advocates also argue that the flexibility afforded to states and localities under block grant programs allows them to innovate and experiment with new approaches to governmental challenges that would not be possible if the funding were provided through more restrictive categorical grants. They argue that states have a history of learning from one another through the sharing of best practices at forums sponsored by the National Governors Association, through state and local government officials' participation in their respective national organizations' annual meetings, and through word-of-mouth.
Block grant advocates also assert that block grants promote long-term planning. Unlike project categorical grants that require state and local government officials to compete for funding, block grants use formulas to distribute funds. They argue that the use of formulas provides recipients greater assurance that funding will be continued, which makes it easier for them to predict the amount of their grant and to create long-range plans for the funds' use.
Block grant advocates also claim that block grants help to address what they believe is unnecessary and wasteful duplication among existing categorical grant programs. They believe that block grants eliminate this duplication and waste by consolidating categorical grant activities, and by providing states and localities the ability to set their own priorities and allocate funds accordingly. Block grant advocates also argue that block grants will generate cost savings by reducing federal administrative costs related to state and local government paperwork requirements. However, there has been no definitive, empirical evidence that total administrative costs have been significantly reduced by converting categorical grants into block grants. Some federalism scholars have argued that costs related to "administrative overhead burdens may only have been shifted from the national to the state to the local levels through block grants."
Converting entitlement programs into block grants is viewed by some as a means to eliminate what they view as uncontrollable spending. By design, entitlement program funding responds automatically to economic and demographic changes. In the short run, enrollment in entitlement programs tends to increase during and shortly after economic recessions. In the long run, enrollment in entitlement programs tends to increase with overall increases in eligible populations. Because block grants have pre-determined funding amounts, converting entitlement programs, like Medicaid, into block grants has been seen by some as a means to impose greater fiscal discipline in the federal budget process. As a federalism scholar put it:
We face, as a nation, severe, long-term fiscal problems. We face a collision between rising costs for elderly entitlements and a shrinking revenue base.... Over time, some things, many things have to give. And I think block grants are attractive to some policy makers, as a way over a long period of time to squeeze funding for some of the big low-income programs, relative to what it would be under the current entitlement funding structures and it enables it to do it without looking heartless by proposing to throw x-numbers of people over the side in program A, B, or C.
Critics of block grants argue that providing state and local government officials increased flexibility concerning the use of the program's funds reduces the ability of federal administrators and Congress to provide effective program oversight. Because block grants purposively minimize administrative requirements, there are often no federal requirements for uniform data collection, making it difficult to compare data across states and, in the view of some, rendering whatever data are available unusable for effective federal agency and congressional oversight of program performance. To address this deficiency, Congress has added reporting requirements to some block grants and performance incentives that reward states for documented improvements to others.
Block grant critics also assert that state and local government officials will use their increased programmatic flexibility to retarget resources away from individuals or communities with the greatest need toward those with greater political influence. They cite studies of the Community Development Block Grant program (CDBG) that found that political considerations did influence at least some local government officials when they allocated CDBG funds.
Block grant advocates counter this argument by insisting that even if this was the case block grant formulas can be designed to adequately target funds to jurisdictions with the greatest need by including objective indicators of need in the distribution formula. They also point to various studies that have examined the retargeting issue and have not found evidence of significant redirection of funds. For example, a GAO study of the five block grants enacted prior to 1981 found that of the three block grant programs that had a stated objective of serving the economically needy, "there were no consistent differences between the earlier categorical programs and the pre-1981 block grants in targeting benefits to lower income people or to minority groups." A study of the block grants enacted during the Reagan Administration also found that states did not use their flexibility to redirect resources away from poor or low-income families. Block grant critics, however, counter these arguments by pointing out that block grant formulas often include population as a criterion of need to attract political support. From their perspective, including population in block grant formulas prevents block grants from adequately targeting assistance to needy individuals and jurisdictions.
Some block grant critics oppose the consolidation of existing categorical grants into block grants because they believe that funding for the programs is likely to diminish over time, as it is thought to be more difficult to generate political support for broad-purpose, state-administered programs than for categorical programs targeted at specific purposes. For example, they cite a 1995 analysis of five block grants enacted during the 1980s that found that their real (inflation-adjusted) funding level decreased from 1986 to 1995, despite a 66% increase in total federal grant funding during that period; and a 2003 analysis of federal funding for 11 block grants that found that their inflation-adjusted funding levels fell by an average of 11%. Also, in 2006 GAO found that real per capita funding for the Community Development Block Grant (CDBG) program had declined since 1978 "by almost three-quarters from about $48 to about $13 per capita." From their perspective, block grants critics view block grants as a "backdoor" means to reduce government spending on domestic issues.
Critics of block grants also contend that recipients may substitute federal block grant funds for their own financial contribution to an activity. Congress has addressed this concern by including state maintenance-of-effort provisions in grant programs which require recipients to maintain the level of funding for an activity that existed either before receiving the grant funds or over a specified period. 
A search of federal grants-in-aid programs in the Catalog of Federal Domestic Assistance revealed that 69 federal grants to state and local governments have state spending maintenance-of-effort (MOE) requirements to prevent state and local governments from substituting federal funds for existing state and local government funds. For example, the Temporary Assistance for Needy Families (TANF) block grant program requires states to maintain spending from their own funds on specified TANF or TANF-related activities at 75% of what was spent from state funds in FY1994 in TANF's predecessor programs of cash, emergency assistance, job training, and welfare-related child care spending ($10.4 billion in the aggregate for all states). States are required to maintain their own spending at least at that level, and the MOE requirement increases to 80% of FY1994 spending for states that fail to meet TANF work participation requirements. States failing to meet the MOE requirement are subject to a reduction in the state's subsequent year's block grant funding by $1 for each $1 shortfall from the required spending level.
section_title: When Should Block Grants Be Considered?
paragraphs: Since the first block grant's enactment in 1966, analysts and policy makers have tried to identify the circumstances in which block grants are most desirable and circumstances in which it is appropriate to consider converting existing categorical grants into block grants. A leading federalism scholar suggested that block grants should be considered if the following conditions are present:
when the federal government desires to supplement service levels in certain broad program areas traditionally provided under state and local jurisdiction; when broad national objectives are consistent with state and local program objectives; when the federal government seeks to establish nationwide minimum levels of service in those areas; and when the federal government is satisfied that state and local governments know best how to set subordinate priorities and administer the program.
In the past, Congress has consolidated categorical grant programs to create new block grants. The now–defunct U.S. Advisory Commission on Intergovernmental Relations (ACIR) said that it may be appropriate to terminate or consolidate categorical programs when
programs are too small to have much impact or to be worth the cost of administration; programs do not embody essential and clear national objectives; programs get (or could get) most of their funding from state and local governments, or from fees for services, or could be shifted to the private sector; and in functional areas including health, education, and social services, that have a large number of programs; or in functional areas including justice, natural resources, and occupational health and safety, that have a high fragmentation index score (ACIR devised a fragmentation index that measured the percentage of grant programs in a functional category [i.e., housing, transportation] relative to the percentage of federal funding allocated to programs in the functional category).
section_title: Contemporary Controversies: How to Evaluate Block Grants
paragraphs: Block grants have been praised by some for providing state and local government officials additional flexibility to meet state and local needs, but are criticized by others because, in their view, accountability for results can be difficult when funding is allocated based on formulas and population counts rather than performance or meeting demonstrated need. In addition, block grants pose performance measurement challenges precisely because they can be used for a wide range of activities. For example, the obstacles to measuring and achieving results through block grants were reflected in their Program Assessment Rating Tool (PART) scores.
PART was a set of questionnaires that the George W. Bush Administration developed to assess the effectiveness of seven different types of federal programs, in order to influence funding and management decisions. These seven "program types" included direct federal programs; competitive grant programs; block/formula grant programs; regulatory based programs; capital assets and service acquisition programs; credit programs; and research and development programs. The Obama Administration initially announced that it would continue to use PART to evaluate programs, but would seek changes to the questionnaires to reflect different performance goals and to ensure that "programs will not be measured in isolation, but assessed in the context of other programs that are serving the same population or meeting the same goals." It subsequently decided not to use PART scores to measure program performance. Instead, the Obama Administration decided to use program evaluations focused on performance improvement strategies to achieve identified high priority performance goals. 
PART focused on four program aspects: purpose and design (20%); strategic planning (10%); program management (20%); and program results/accountability (50%). Each program aspect was provided a percentage "effectiveness" rating (e.g., 85%) based on answers to a series of questions. The scores for the four program aspects were then averaged to create a single PART score. Programs were then rated, effective (193 in 2008), moderately effective (326 in 2008), adequate (297 in 2008), ineffective (26 in 2008), and results not demonstrated (173 in 2008). Block grants received the lowest average score of the seven PART program types in 2008, 5% of block grant programs assessed were rated ''ineffective,'' and 30% were rated ''results not demonstrated."
Block grant critics point to PART's low ratings of block grants as proof that block grants should be avoided. Block grant advocates argue that PART's heavy weighting of program results/assessment in its calculations made PART a poor measure for assessing block grant performance. As one study concluded,
the federal requirements ... tend to ignore the reality that many programs contain multiple goals and outcomes, rather than focusing on a single goal or outcome. These multiple goals and outcomes are often contradictory to each other. Yet PART pushes agencies to focus on single goals.... The federal efforts dealing with performance move against the devolution tide.... Efforts to hold federal government agencies accountable for the way programs are implemented actually assume that these agencies have legitimate authority to enforce the requirements that are included in performance measures. 
Block grant advocates also note that during his presidency President George W. Bush proposed several new block grants, despite PART's low scoring of block grant performance.
section_title: Contemporary Controversies: Funding
paragraphs: Historically, the success or failure of block grant proposals has often been determined, in large part, on stakeholders' views of the program's future funding prospects. However, in recent years, this issue has taken on even greater prominence than in the past. Prior to 1995, the primary rationale provided by block grant advocates for converting categorical grants into block grants was to eliminate program overlap and duplication and introduce greater program efficiencies by providing state and local government officials additional flexibility in program management. Since then, block grant advocates have continued to argue that converting categorical grants into block grants reduces program overlap and duplication, but they have also increasingly touted block grants as a means to control federal spending by capping expenditures and closing open-ended entitlement programs.
The recent increased emphasis on capping expenditures and closing previously open-ended entitlement programs has changed the nature of congressional consideration of what some have labeled "new-style" block grant proposals. During their deliberations, instead of focusing primarily on questions concerning state and local government administrative and fiscal capacity and commitment to the program, Congress has increasingly focused on the short- and long-term budgetary implications of block grants, both for the federal budget and for recipients. Some have argued that the new-style block grants send a mixed message to state and local government officials, providing them added programmatic authority, flexibility in administration, and greater freedom to innovate, but at the cost of restrained federal financial support and increased performance expectations.
The following are some of the more recent block grant proposals that have received congressional consideration.
subsections: section_title: President George W. Bush's Community and Economic Development Block Grant Proposal
paragraphs: In his FY2006 budget proposal, President George W. Bush included a Strengthening America's Communities Initiative, which would have combined 18 existing community and economic development programs (including the Community Development Block Grant program) into a two-part block grant. Administrative responsibility for the 18 programs would have been transferred from five federal agencies (the Department of Housing and Urban Development, the Economic Development Administration in the Department of Commerce, the Department of the Treasury, the Department of Health and Human Services, and the Department of Agriculture) to the Department of Commerce, which administers the programs of the Economic Development Administration. Under the proposal, the Department of Commerce would have administered a core block grant program and a bonus program. The bonus program would have awarded additional funds to communities that demonstrated efforts to improve economic conditions. The proposal would have reduced total funding for the 18 programs from $5.6 billion in FY2005 to $3.7 billion in FY2006. Congress rejected the Administration's budget proposal and funded all 18 programs at a total level of $5.3 billion.
section_title: Medicaid and SNAP Block Grant Proposals
paragraphs: The National Commission on Fiscal Responsibility and Reform, a bipartisan debt commission established by President Obama by executive order, recommended in December 2010 that the federal-state responsibility for Medicaid be adjusted, with consideration given to the use of block grants for acute or long-term care as a means to contain Medicaid costs. In addition, as mentioned previously, Representative Paul Ryan, chair of the House Committee on the Budget, has recommended that the federal share of Medicaid be converted into a block grant as a means to "improve the health-care safety net for low-income Americans" and to save $732 billion over 10 years. Also, the House-passed FY2013, FY2014, and FY2015 Concurrent Budget Resolutions ( H.Con.Res. 112 , H.Con.Res. 25 , and H.Con.Res. 96 ) proposed converting Medicaid from an open-ended, individual entitlement formula categorical grant into a block grant. The report accompanying the House Concurrent Budget Resolution for FY2015 estimated that converting Medicaid into a block grant would save $732 billion over 10 years.
Advocates of converting Medicaid into a block grant argue that
Medicaid's current structure gives states a perverse incentive to expand the program and little incentive to save. For every dollar that a state government spends on Medicaid, the federal government pays an average of 57 cents. Expanding Medicaid coverage during boom years is tempting and easy to do—state governments pay less than half the cost. Yet to restrain Medicaid's growth, states must rescind a dollar's worth of coverage to save 43 cents. The recently enacted health-care law adds even more liabilities to an already unsustainable program. CBO estimates the new law will increase federal Medicaid spending by $792 billion over the 2015-2024 period. This is due to the millions of new beneficiaries that the law drives into the program. In fact, CBO estimates that in 2024, 13 million new enrollees will be added to the Medicaid program as a result of the Affordable Care Act. For all these reasons, this budget recommends a fundamental reform of the Medicaid program.
…The exact contours of a Medicaid reform—as well as other policies flowing from the fiscal assumptions in this budget resolution—will be determined by the committees of jurisdiction. Nevertheless, the need for fundamental Medicaid reform and other measures to slow the growth of federal spending are critical, and one set of potential approaches is described below.
… Provide State Flexibility on Medicaid. One way to secure the Medicaid benefit is by converting the federal share of Medicaid spending into an allotment that each state could tailor to meet its needs, indexed for inflation and population growth. Such a reform would end the misguided one-size-fits-all approach that has tied the hands of state governments. States would no longer be shackled by federally determined program requirements and enrollment criteria. Instead, each state would have the freedom and flexibility to tailor a Medicaid program that fit the needs of its unique population. 
The budget resolution proposes to transform Medicaid from an open-ended entitlement into a block-granted program like SCHIP. These programs would be unified under the proposal and grown together for population growth and inflation.
Opponents argue that 
"Block-granting" Medicaid is simply code for deep, arbitrary cuts in support to the most vulnerable seniors, individuals with disabilities, and low-income children.… Claiming to "repair" Medicaid by cutting it by a third is like saving a drowning person by throwing them an anchor.
… Millions of seniors in nursing homes will be especially hurt by the reckless cuts to Medicaid. Over two-thirds of the base Medicaid program supports the elderly and the disabled and this budget slashes the Medicaid budget in its last year by a full 25%—in addition to repealing the Affordable Care Act expansion of the program.
… This [House version of the concurrent] budget [resolution for FY2015] reserves perhaps its cruelest blow to those seeking to climb out of poverty and into the middle class.… It absolutely decimates safety net programs—like SNAP and Medicaid—designed to stop people from falling into deep poverty.
The House's FY2015 Concurrent Budget Resolution also would convert the Supplemental Nutrition Assistance Program (food stamps) into a block grant, estimating the savings as $125 billion over 10 years. It also would terminate the Social Services Block Grant indicating that the grant provides services that "… are also funded by other Federal programs."
section_title: President Obama and Block Grants
paragraphs: President Obama has not issued a formal federalism plan and has not advocated a major shift in funding priorities within functional categories. However, the expansion of Medicaid eligibility under P.L. 111-148 , ACA, which President Obama strongly endorsed, is expected to increase health care's position as the leading category of federal assistance to state and local governments. The ACA also either authorized or amended 71 federal categorical grants to state and local governments, further enhancing the role of categorical grants in the intergovernmental grant-in-aid system. 
The Obama Administration has also not formally advocated a major shift in funding priorities from categorical grants to block grants, or from block grants to categorical grants. However, the number of funded block grants has declined somewhat during the Obama Administration, from 24 in 2009 to 21 in 2014. 
The Obama Administration supported ARRA's funding for two, relatively significant temporary block grants (the $53.6 billion Government Services State Fiscal Stabilization Fund for public education; and the $3.2 billion Energy Efficiency and Conservation Block Grant for energy efficiency and conservation programs) and ARRA's provision of additional, temporary funding to TANF ($5 billion), the Child Care and Development Block Grant ($2 billion), the Community Development Block Grant ($1 billion), the Community Services Block Grant ($1 billion), and the Native American Housing Block Grant ($510 million) programs. However, the Obama Administration has generally advocated enactment of new competitive categorical grant programs (e.g., TIGER surface transportation grants and Race to the Top education grants) rather than the expansion of existing block grants or the creation of new ones. 
For example, in its FY2015 budget request, the Obama Administration asked Congress to permanently authorize the TIGER surface transportation grant program "to help spur innovation by competitively awarding funding to projects around the Nation" and to provide $4 billion "for a competitive grant program, Fixing and Accelerating Surface Transportation, designed to create incentives for State and local partners to adopt critical reforms in a variety of areas, including safety and peak traffic demand management." 
In the community and regional development area, the Obama Administration argued that the Community Services Block Grant program's "current structure does little to hold [community action] agencies accountable for outcomes" and proposed to reduce its funding from $635 million to $350 million and "to competitively award funds to high performing agencies that are most successful at meeting community needs." The Obama Administration also recommended funding reductions for the Community Development Block Grant program and the HOME Investment Partnership Program, arguing that these block grants needed "reforms to improve each program's performance by eliminating small grantees, thereby improving efficiency, driving regional coordination, and supporting grantees in making strategic, high-impact investments that address local community goals." 
In the education, training, employment, and social services area, the Obama Administration requested $4 billion "for a new competitive grant program, the State Higher Education Performance Fund" to "support States that are committed to investing in higher education and improving performance and outcomes at their higher education institutions" and $6 billion "to offer competitive grants to partnerships of community colleges, public and non-profit training entities, industry groups, and employers to launch new training programs and apprenticeships." 
In the health area, the Obama argued that the Preventative Health and Health Services Block Grant should be eliminated because it is "duplicative with existing activities that could be more effectively implemented through targeted programs." 
The Obama Administration has advocated the consolidation of categorical grant programs in several functional areas as a means to reduce duplication and promote program efficiency. However, instead of merging these categorical grants into a new block grant, the Obama Administration has advocated merging them into other categorical grant programs. For example, the Obama Administration supported the consolidation of dozens of surface transportation categorical grant programs into other surface transportation grant programs in P.L. 112-141 , the Moving Ahead for Progress in the 21 st Century Act of 2012 (MAP-21). The Obama Administration has also advocated merging categorical grant programs in the Department of Homeland Security as a means to "better target these funds." 
subsections: section_title: Appendix. Brief History of Block Grants
paragraphs: H.R. 5686, The Public Welfare Act of 1946, introduced by Representative Aime J. Forand, D-RI, as an amendment to the Social Security Act, is the first known congressional effort to enact a block grant. It would have allowed states to continue providing public welfare assistance in "the present categories of old-age assistance, aid to dependent children, and aid to the blind, or whether they preferred to provide for these groups as part of a comprehensive assistance program" with choices about program design left to the states. 
In 1949, the Commission on the Organization of the Executive Branch of the Government, known as the Hoover Commission in honor of its chair, Herbert Hoover, further raised awareness of the block grant concept by recommending that "a system of grants be established based upon broad categories – such as highways, education, public assistance and public health – as contrasted with the present system of extensive fragmentation." However, Congress did not create the first block grant until 1966 for comprehensive health care services (now the Preventive Health and Health Services Block Grant) in P.L. 89-749, the Comprehensive Health Planning and Public Health Services Amendments of 1966, later known as the Partnership for Public Health Act. It replaced nine formula categorical grants. Two years later, Congress created the second block grant, the Law Enforcement Assistance Administration's Grants for Law Enforcement program (sometimes referred to as the "Crime Control" or "Safe Streets" block grant) in the Omnibus Crime Control and Safe Streets Act of 1968. Unlike the health care services block grant, it was created de novo, and did not consolidate any existing categorical grants.
In his 1971 State of the Union speech, President Richard M. Nixon announced a plan to consolidate 129 federal grant programs in six functional areas, 33 in education, 26 in transportation, 12 in urban community development, 17 in manpower training, 39 in rural community development, and 2 in law enforcement into what he called six "special revenue sharing" programs. Unlike the categorical grants they would replace, the proposed special revenue sharing programs had no state matching requirements, relatively few auditing or oversight requirements, and the funds were distributed automatically by formula without prior federal approval of plans for their use. 
The education, transportation, rural community development, and law enforcement proposals failed to gain congressional approval, primarily because they generated opposition from interest groups affiliated with the programs who worried that the programs' future funding would be compromised. Nonetheless, the Nixon Administration's efforts led to the adoption of three more block grants; the first was signed by President Nixon and the remaining two were signed by President Gerald R. Ford.
The Comprehensive Employment and Training Assistance Block Grant program was created by the Comprehensive Employment and Training Act of 1973. It merged 17 existing manpower training categorical grant programs. The Community Development Block Grant program (and its affiliated Indian Community Development Block Grant program which is funded through a set-aside of the Community Development Block Grant's formula funds) was created by the Housing and Community Development Act of 1974. It consolidated six existing community and economic development categorical grant programs. Title XX social services, later renamed the Social Services Block Grant program, was created de novo and, therefore, did not consolidate any existing categorical grant programs. It was authorized by the 1974 amendments of the Social Security Act which was signed into law on January 4, 1975. 
Congress did not approve any additional block grants until 1981. President Ronald Reagan had proposed consolidating 85 existing elementary and secondary education, public health, social services, emergency assistance (for low-income energy assistance and emergency welfare assistance), and community development categorical grants into seven block grants (two in elementary and secondary education, two in public health, and one each for social services, emergency assistance, and community development). He also recommended that the programs' funding be reduced 25%, arguing that the administrative savings brought about by the conversion to block grants would largely offset the budget reduction. Congress subsequently adopted the Omnibus Budget and Reconciliation Act of 1981 which consolidated 75 categorical grant programs and two existing block grants into the following nine new, or revised, block grants: 
Elementary and Secondary Education (37 categorical grants); Alcohol, Drug Abuse, and Mental Health Services (10 categorical grants); Maternal and Child Health Services (9 categorical grants); Preventive Health and Human Services Block Grant (merged 6 categorical grants with the Health Incentive Grants for Comprehensive Health Services Block Grant); Primary Care (2 categorical grants); Community Services (7 categorical grants); Social Services (one categorical grant and the Social Services for Low Income and Public Assistance Recipients Block Grant); Low-Income Home Energy Assistance (1 categorical grant); and revised Community Development Block Grant program (adding an existing discretionary grant and 3 categorical grants).
Overall, funding for the categorical grants bundled into these block grants was reduced 12%, about $1 billion, from their combined funding level the previous year.
In retrospect, some federalism scholars consider these block grants as more "historical accidents than carefully conceived restructurings of categorical programs" because they were contained in a lengthy bill that was adopted under special parliamentary rules requiring a straight up or down vote without the possibility of amendment, the bill was designed to reduce the budget deficit not to reform federalism relationships, and the bill was not considered and approved by authorizing committees of jurisdiction. Nonetheless, largely due to the Omnibus Budget and Reconciliation Act of 1981, in FY1984 there were 12 block grants in operation (compared to 392 categorical grants), accounting for about 15% of total grants-in-aid funding.
During the first six years of his presidency, President Ronald Reagan submitted 32 block grant proposals to Congress, with 9 created by the Omnibus Budget and Reconciliation Act of 1981 and the Federal Transit Capital and Operating Assistance Block Grant added in 1982. In addition, the Job Training Partnership Act of 1982 created a new block grant for job training that replaced the block grant contained in the Comprehensive Employment and Training Act of 1973.
Federalism scholars generally agree that President Reagan had unprecedented success in achieving congressional approval for block grants. However, they also note that most of President Reagan's block grant proposals failed to gain congressional approval, primarily because they were opposed by organizations that feared that, if enacted, the block grants would result in less funding for the affected programs. For example, in 1982, President Reagan proposed, but could not get congressional approval for, a $20 billion "swap" in which the federal government would return to states full responsibility for funding Aid to Families With Dependent Children (AFDC) (now Temporary Assistance for Needy Families) and food stamps in exchange for federal assumption of state contributions for Medicaid. As part of the deal, he also proposed a temporary $28 billion trust fund or "super revenue sharing program" to replace 43 other federal grant programs. Both the swap proposal and the proposed devolution of 43 federal grants were opposed by organizations that feared that, if enacted, they would result in less funding for the affected programs. For example, the National Governors Association supported the federal takeover of Medicaid, but objected to assuming the costs for AFDC and food stamps. The economy was weakening at that time and governors worried that they would not have the fiscal capacity necessary to support the programs without continued federal assistance.
From 1983 until 1995, Congress approved six new block grants: the Community Youth Activity Block Grant (1988), Child Care and Development Block Grant (1990), the HOME Investment Partnerships Program (1990), the Surface Transportation Program (1991), Substance Abuse Prevention and Treatment Block Grant (1992), and the Community Mental Health Services Block Grant (1992). Established by the Intermodal Surface Transportation Efficiency Act of 1991, the Surface Transportation Program had, by far, the largest budget of any block grant program at that time, with $17.5 billion appropriated in FY1993. Three block grants were terminated during this period: Community Youth Activity Program, Law Enforcement Assistance, and Alcohol, Drug Abuse, and Mental Health (which was broken into two new block grants, the Community Mental Health Services Block Grant and the Prevention and Treatment of Substance Abuse Block Grant, in 1992). According to the now defunct U.S. Advisory Commission on Intergovernmental Relations, there were 15 block grants in operation in 1995 (23 block grants had been enacted, 4 were converted into other block grants, and 4 were eliminated), and 618 categorical grants. In FY1995, block grants accounted for about 14% of the $228 billion in federal grants-in-aid assistance.
In 1996, the open-ended entitlement categorical grant, Aid to Families With Dependent Children, was converted into the Temporary Assistance to Needy Families (TANF) block grant by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Funded at $16.7 billion annually, TANF rivaled the Surface Transportation Program for the largest budget of all the block grants. Like some other block grants, TANF "was a hybrid program balancing stringent federal standards against significant state flexibility." Funding ($424 million) was also provided for a Local Law Enforcement Block Grant which had been authorized the previous year in the Local Law Enforcement Block Grant Act of 1995.
In 1998, the Juvenile Accountability Block Grant program was created by the FY1998 Department of Justice Appropriations Act, and later codified by the 21 st Century Department of Justice Reauthorization Act of 2002. It provides funding for 16 accountability-based purpose areas, including, but not limited to, implementing graduated sanctions; building or operating juvenile correction or detention facilities; hiring juvenile court officers, including judges, probation officers, and special advocates; and hiring additional juvenile prosecutors. The 21 st Century Department of Justice Reauthorization Act of 2002 also consolidated several pre-existing categorical grant programs into the Juvenile Delinquency Prevention Block Grant program. It provides funding for a wide array of services, treatments, and interventions, including, but not limited to projects that provide treatment to juvenile offenders and at risk juveniles who are victims of child abuse or neglect, or who have experienced violence at home, at school, or in their communities; and educational projects or support services for juveniles that focus on encouraging juveniles to stay in school; aiding in the transition from school to work; and encouraging new approaches to preventing school violence and vandalism.
Prior to the September 11, 2001, terrorist attacks and the subsequent creation of the Department of Homeland Security, the federal government had three categorical grants-in-aid programs pertinent to homeland security: the State Domestic Preparedness program administered by the Department of Justice, the Emergency Management Performance Grant program administered by the Federal Emergency Management Agency, and the Metropolitan Medical Response System administered by the Department of Health and Human Services. In 2011, there were 17 federal grant programs administered by the Grant Programs Directorate within the Federal Emergency Management Agency in the Department of Homeland Security, including 14 categorical grant programs and three block grant programs: State Homeland Security Grants, formerly called the State Domestic Preparedness Program (created in 2003), Urban Area Security Initiative Grants (created in 2003), and the Regional Catastrophic Preparedness Grant (created in 2008).
In 2005, the Violence Against Women and Department of Justice Reauthorization Act of 2005 combined the Edward Byrne Memorial State and Local Law Enforcement Assistance programs and the Local Law Enforcement Block Grant program into the Edward Byrne Memorial Justice Assistance Grant program. Its funds can be used for seven broad purposes: law enforcement, prosecution and court programs, prevention and education programs, corrections and community corrections programs, drug treatment programs, planning, evaluation, and technology improvement programs, and crime victim and witness programs (other than compensation).
P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA) provided temporary additional funding for several block grant programs, including $3.2 billion for the Energy Efficiency and Conservation Block Grant (EECBG) program. It was authorized by the Energy Independence and Security Act of 2007, but had not been appropriated any funding. It provides federal grants to local governments, Indian tribes, states, and U.S. territories to reduce energy use and fossil fuel emissions, and for improvements in energy efficiency. Approximately $2.7 billion of the ARRA funding was allocated through an apportionment formula and approximately $454 million was allocated through competitive grants.
ARRA also authorized the temporary $53.6 billion Government Services State Fiscal Stabilization Fund, which operated as a block grant. Under that program, the Department of Education awarded states approximately $48.6 billion through an apportionment formula "in exchange for a commitment to advance essential education reforms" focusing on state support for education, equity in teacher distribution, data collection, standards and assessments, and support for struggling schools. Most of the $48.6 billion (81.8%) was to be spent "for the support of elementary, secondary, and postsecondary education and, as applicable, early childhood education programs" and the remainder (18.2%) "for public safety and other government services, which may include assistance for elementary and secondary education and public institutions of higher education, and for modernization, renovation, or repair of public school facilities and institutions of higher education facilities, including modernization, renovation, and repairs that are consistent with a recognized green building rating system." The fund's remaining $5 billion was awarded competitively under the "Race to the Top" and "Investing in What Works and Innovation" categorical grant programs.
In FY2012, there were 28 block grants (26 funded and 2, the Innovative Education Program Strategies Block Grant and the Juvenile Delinquency Prevention Block Grant, were authorized, but were not funded). In FY2013, there were 25 block grants (22 funded and 3, the Innovative Education Program Strategies Block Grant, the Energy Efficiency and Conservation Block Grant, and the Juvenile Delinquency Prevention Block Grant, were authorized, but were not funded). The Government Services State Fiscal Stabilization Fund (Department of Education) and the Regional Catastrophic Preparedness Grant (Department of Homeland Security) are no longer available. In addition, the State Homeland Security Grant and Urban Area Security Initiative Grant programs are now within the Department of Homeland Security's Homeland Security Grant Programs. In FY2014, there are 23 block grants (21 funded and 2, the Innovative Education Program Strategies Block Grant and the Energy Efficiency and Conservation Block Grant, are authorized, but are not funded). The authorizations for the Juvenile Delinquency Prevention Block Grant and the Juvenile Accountability Block Grant programs have expired, and neither program is currently being funded through the appropriations process.