Federal Grants to
States and Localities

MAKING GOVERNMENT RESPONSIBLE means . . . investing in results, not just activities . . . returning to the States and localities the responsibility for meeting purely local needs . . . assisting States and localities based on the value of the services to be provided, and the real potential for program success, and not just the socio-economic status of the community.

POSITION SUMMARY:  

We need to greatly reduce federal programs of assistance to States and localities – and stop depriving them of tax revenues that are collected by the federal government and merely returned to the States and localities with federal strings attached.
 
We need to make the State and local agencies that receive federal assistance responsible for results.

We need to stop allocating federal funds to States and localities based on their ethnic composition and economic status of the community and start allocate funds based on the potential for success and activity and the value of the benefit to the local community.

[Related needs for addressing community needs in an efficient and effective manner are discussed in “Community Development.”]

DISCUSSION:

The federal government maintains over 800 federal financial assistance programs that provide funds to state and local agencies through various forms of block grants. While these programs may have been established with the best of intentions, their value is significantly compromised by their diversity. In its latest study of federal grant programs, the Government Accountability Office noted that:

• The grant application and reporting requirements frequently outweigh the value of the grant.

• Due to the lack of centralization of Grants, applicants must navigate through myriads of grant programs to find appropriate sources of funds for specific projects.

• Because many of the federal grant programs are small, grant applicants must frequently seek funds from many different agencies to find adequate funding for deserving projects.

For more than 30 years, the General Accountability Office has been calling for reform of the federal grant programs to reduce the fragmentation of programs.

Even the House Government Operations Committee, the predecessor to the House Government Reform Committee, has acknowledged that the consolidation of closely related categorical programs into broader purpose grants and the placement of similar programs in a single federal agency would significantly improve grant-in-aid administration.

Congress has consistently ignored these calls for program consolidation, preferring instead to enact legislation merely calling for inter-agency “collaboration.”

We must: (a) consolidate all programs having common objectives and missions, (b) simplify the grant application process for all grant programs and (c) provide State and local agencies the maximum possible latitude in using “federal” money in ways that reflect the uniqueness of local communities. We must also reduce the bureaucracy of federal grant programs by making “federal” money directly available to the agencies providing needed services and eliminating the intervening State bureaucracies.

Block Grants to States — and, to a lessor extent, block grants to local governments --  are subject to more stringent standards for accounting for how they spend federal money.  These requirements provide some assurance that state and local governments are doing what the legislation calls for, but they do nothing to assure that grant recipients accomplish anything. 

As a general premise, I oppose the whole notion that the federal government should be able to take tax money from everyone and then give it back to some states and localities--with strings attached.  But fixing that problem will take some time. 

In the meantime, we need to change the Congressional mindset from one that merely promotes activity to one that requires results.  I believe that State and local grants should be approached in a new way as follows:

1. Legislation should established intended outcome—with no restrictions on the activities that a state or locality may undertake to accomplish those objectives.
2. State and local grants should be awarded based on an appropriate application and Plan.    
3. Where the Plan for the attainment of the objectives on one legislative enactment is dependent on the availability of funds from other programs, acceptance of the Plan by the by the relevant federal agency must constitute a commitment that the funds required from the other agencies and programs will be available.  
4. A schedule of progress toward achieving the legislative objectives according to the relevant Plan should be negotiated between the grant recipient and the relevant federal agency.  
5. Federal funds given to the states to accomplish the objectives of the Plan should be advanced as a loan and the loan “forgiven” in proportion to the extent to which the agreed upon objectives are being met.

 This approach to federal funding would have several desirable consequences, including: 

• State and local plans will have to be real action plans with measurable objectives.
• To avoid being “stuck” with the cost of a program—e.g. the consequences of  failure to achieve stated objectives and not having the federal “loan” forgiven—grant recipients would be forced to (a) be more realistic in establishing program objectives, (b) use their grant funds in the most effective way to achieve the agreed upon measurable objectives and (c) direct their federal funds to achieving program goals rather than maintaining administrative bureaucracies.

With the conversion of grant funds from a form of “entitlement” to a pay-for-performance model, some States may choose to stop draining the federal treasury by taking funds to achieve objectives that they know they cannot achieve.  But that is not a bad consequence.  If states begin refusing federal funds because they do not believe they can achieve the objectives of the federal legislation, that will be a message to Congress that it either has to either increase funding or reduce expectations.    

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