KHI News Service

Block grants over time

A short history of federal block grants

By Mike Shields | May 02, 2011

The earliest federal block grants — the Partnership for Health in 1966 and Safe Streets in 1968 — were Democratic initiatives. Democrats then controlled Congress and the White House.

Subsequent pushes for block grants have come mostly from Republicans. In 1971, President Nixon called for consolidating 129 programs into six block grants. Congress, still controlled by Democrats, rejected his plan. But by the end of the following Ford administration there were three new block grants, two of which have survived: The Community Development Block Grant and the Social Services Block Grant.

In 1981, President Reagan proposed consolidating 85 programs into seven block grants. Congress instead consolidated 77 categorical grants into nine block grants. With those changes, block grants came to make up 17 percent of total federal aid to state and local governments. Unlike earlier block grants, these reduced funding by about 25 percent. With new distribution formulas, some states and local bodies became “double losers,” according to an Urban Institute study, getting smaller shares of a smaller total.

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Block grant initiatives of the 1990s and 2000s were the first to eliminate individual entitlements, which is what would happen if Medicaid were converted to block grants.

One of biggest changes in that period came with the creation of Temporary Assistance for Needy Families, (TANF) a program that replaced the Aid to Families with Dependent Children program (AFDC).

Both programs provide welfare assistance to poor mothers and children, but federal funding for TANF has remained more or less fixed since it was first block granted more than 20 years ago.

The U.S. House budget plan, the one associated with Wisconsin Republican Congressman Paul Ryan, would block grant Medicaid the way welfare reforms of the Gingrich/Clinton era block granted welfare payments to poor families.

“Congressman Ryan is talking about a true block grant in the way the TANF program was block granted,” said Linda Katz, head of Rhode Island’s Poverty Institute. Katz has closely tracked the Medicaid global waiver given to her state, which she said differed from a true block grant. “TANF funding for Rhode Island was $95 million in 1996 and in 2011 we're receiving $95 million. And that's what's very frightening about considering a block grant in the Medicaid program, where we’re serving such a variety of people. There's no way the state could survive with a fixed amount of money from the federal government.”

Annual Kansas TANF spending also remained nearly constant at around $165 million since 1997, according to data from the federal Administration on Children and Families. The state share of that spending, however, has gone up.

Opponents and supporters of block grants agree about one thing: They result in reduced federal spending. Though some block grants began by providing more money than the programs they replaced, as was the case with Rhode Island’s global Medicaid waiver, over time the federal dollars became fewer.

Urban Institute researchers analyzed block grants beginning with the first in the 1960s.

They reported that, “the real value of block grant funding tends to diminish over time. A study of five Reagan block grants found that the real value of four of them decreased from 1986 to 1995, despite a 66 percent increase in total federal grants to state and local governments during this period. A more recent analysis of 11 block grants found that from their establishment to the present, real federal funding fell by an average of 11 percent.

The researchers also reported that the flexibility afforded state and local governments by the block grants also suffered over time.

“Once in operation,” the researchers concluded, “block grants have been subject to "creeping categorization." In this process, Congress erodes the flexibility of block grants by adding restrictions, requiring that a share of funds be set aside for particular purposes, or creating new categorical programs with the same or related objectives. A common explanation traces this phenomenon to members of Congress, who seem to reap greater electoral benefits from narrowly targeted categorical grants or set-asides than from wide-ranging block grants. Categorization can also be seen as Congress's response to perceived misuse or misadministration of block grants by state or local governments.”

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