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Block Grants

Last Updated: 2006

Block grants are an intergovernmental reform that gained momentum in the 1970’s during the Nixon administration as a strategy for dealing with the fragmentation and incoherence brought about by the proliferation of grant-in-aid programs during the 1960’s, when both the number and the dollar amount of federal grants tripled. The vast majority of these new grant programs were categorical grants, which limited spending to a very narrow program category. Critics, of whom the most vocal were mayors and other local government officials, contended that despite the growth in federal assistance there was no “system” to speak of. Their most frequent concern was that the duplication and overlap of grant programs (multiple programs for the same purpose in multiple federal agencies) confounded their efforts at planning and coordination. Second, they felt federal grant programs distorted local priorities as the lack of uniformity in matching rates across programs tended to steer local budgets toward the “easy money” and away from local priorities they might otherwise prefer. For example, to deal with the problem of traffic congestion in the 1960’s state and local officials faced the choice of building more freeways (federal aid would pay for 90 percent of the cost of highway construction) or investing in mass transit (federal aid would only pay 50 percent of the cost of purchasing transit buses or constructing a rapid rail line). Third, local officials were concerned about the timing and uncertainty of grant awards as well as the manner in which funds were allocated. Many officials felt federal funds were more likely to be allocated based on the grantsmanship abilities of local governments (especially the biggest cities) rather than the relative merits and needs of applicant communities.

Although the idea of grant consolidation had surfaced in the 1940’s and 1950’s, Congress never gave such proposals serious consideration because many members of Congress believed block grants were simply a guise for spending cuts, and that block grants would lessen congressional control over federal programs. In 1966, Congress adopted the Partnership for Health Act, which consolidated sixteen categorical programs into a single block grant for health. Two years later a block grant for law enforcement assistance was passed. In his first major address on domestic policy issues, President Richard Nixon called for a “New Federalism” in “which power, funds, and responsibility will flow from Washington to the States and to the people.” Central to Nixon’s New Federalism was the enactment of General Revenue Sharing and six special revenue-sharing programs that would consolidate about one-third of the existing categorical grant programs in the areas of education, transportation, community development, job training, and law enforcement. General Revenue Sharing was enacted in 1972, and block grants for job training and community development followed in 1973 and 1974.

The next wave of block granting took place during the first year of the Reagan administration. The Omnibus Budget Reconciliation Act of 1981 created nine new block grants by consolidating more than fifty categorical grants and two existing block grants. A third wave of block grant reforms were proposed by Republicans in the 104th Congress following the 1994 elections, which gave Republicans control of both houses of Congress. The Republican leadership proposed creating over a dozen new block grant programs that would consolidate more than 300 existing grant programs totaling $125 billion. Funding for the new block grant programs as well as existing block grant programs would be considerably smaller with many existing block grants slated for budget cuts ranging from 20 to 50 percent. Though most of the new block grants proposed failed to pass Congress or the president vetoed those that did, most noteworthy was the creation of a new block grant program for welfare, Temporary Assistance to Needy Families (TANF). The TANF program terminated the Aid to Families with Dependent Children (AFDC) program, an open-ended entitlement program that provided cash assistance to needy families and children, and replaced it with a capped block grant to the states. Similar proposals to convert entitlement programs for Medicaid and food stamps into block grants were vetoed by President Bill Clinton.

According to the Advisory Commission on Intergovernmental Relations, five features distinguish block grants from categorical grants: (1) aid is provided for a wide range of activities within a broadly defined functional area; (2) recipient jurisdictions are given broad discretion in defining problems, designing local programs, and allocating resources to support specific projects and activities; (3) federal monitoring and oversight are reduced to the minimum level needed to insure that national goals and objectives are being met; (4) recipient jurisdictions are granted entitlement status (i.e., guaranteed funding), and the amount of funding is determined by a statutory formula as opposed to the discretion of federal administrative agency officials; and (5) the initial recipients of block grants funds tend to be general purpose government officials (e.g., city or state governments) as opposed to specialized government agencies such as urban renewal authorities.

A 1995 report by the U.S. General Accounting Office noted that there were three lessons that could be learned from the experience of the 1981 block grants that should serve as a guide for future congressional action regarding the creation of new block grants. First, there is a need to pay more attention to accountability as Congress frequently added additional conditions that limited state flexibility and in essence “recategorized” some of the new block grants. Second, the tendency to rely on distributions under previous categorical programs as a guide for allocating funds under block grants may not be equitable as such prior distributions generally do not conform well to need, fiscal capacity, or variations in the cost of service provision. Third, though states handled reasonably well the transition to block grants in 1981, the programs being considered for consolidation are often of a fundamentally different nature than the types of programs previously consolidated into block grants (e.g., Medicaid and food stamps).

Presently, there are about two dozen federal block grant programs, which accounted for about 18 percent of federal grant outlays in fiscal 1997. The largest federal block is TANF ($16.5 billion in fiscal year 2005). Other major block grants include Community Development Block Grants ($3 billion), the Child Care and Child Development block grant ($2.1 billion), and the Social Services Block Grant ($1.7 billion).

SEE ALSO: Categorical GrantsDevolutionEducationElectionsIntergovernmental RelationsLocal GovernmentMedicaidNixon, Richard M.Reagan, RonaldRevenue SharingTransportation PolicyWelfare Policy


Timothy Conlan, From New Federalism to Devolution: Twenty-five Years of Intergovernmental Reform (Washington, DC: Brookings Institution, 1998); Richard P. Nathan, Fred C. Doolittle, and Associates, Reagan and the States (Princeton, NJ: Princeton University Press, 1987); George E. Peterson et al., The Reagan Block Grants (Washington, DC: Urban Institute, 1986); U.S. Advisory Commission on Intergovernmental Relations, Block Grants: A Comparative Analysis, ACIR Report A-60 (Washington, DC: U.S. Government Printing Office, 1977); and U.S. General Accounting Office, Lessons Learned from Past Block Grants, GAO Report IPE-82-8, September 23 (Washington, DC: U.S. General Accounting Office, 1982).