The New Block Grants: An Initial Post-Mortem

The Omnibus Budget Reconciliation Act of 1981 consolidated 67 categorical grants into 9 new or revised block grants, which essentially tripled the number of such grants. Federal aid techniques or approaches can be displayed in a continuum, ranging from categorical grants at one extreme to revenue sharing at the other. Block grants lie somewhere in the middle. Relative positioning is determined with respect to three criteria, including the degree of federal funding discretion, programmatic determination, and administrative control. The first two criteria are traditionally used to differentiate categorical grants from block grants, and the latter is commonly held to be the key distinction between block grants and a special revenue sharing approach. Because the act replaces project-by-project grant awards with funding awarded on the basis of statutory formulas, federal funding discretion has been clearly reduced. Recipients, the state governments, will have greater discretion in programmatic determinations under the new block grants than under the superseded categoricals, but the act clearly limits that discretion in the immediate future. To some degree, all of the new block grants constrain initial recipient discretion by including provisions requiring earmarking, pass-throughs, or prohibitions on fundable activities. With the exception of general revenue sharing, the federal government has never before attempted so dramatic a shift in administrative responsibilities. Block grant recipients will be more directly accountable to the public, rather than federal agencies, for efficient and effective performance of the assistance programs. The superseded categoricals were all characterized by federally required plans, reports, audits, and financial agreements. Advanced federal approval of plans and applications is replaced by state proposed use plans; only periodic end-use reports are required, rather than the detailed, line-item expenditure reports commonly found in the former categorical programs. States are given a prominent role in conducting financial and compliance audits. Most of the block grants neither require a non-federal match nor insist on a maintenance effort. Federal requirements in the new block grants tend to emphasize performance rather than procedural concerns.