When the Federal Government Makes a Block Grant

When the federal government makes a block grant? A block grant is like a special amount of money from a big government to a smaller government in a specific region. Unlike other grants, block grants give the smaller government more freedom to decide how to use the money.

They can create and run their own programs without too much interference from the big government. Block grants, along with categorical grants and general revenue sharing, are three different ways that the federal government helps smaller governments with money and support.

In the United States, a block grant is a specific amount of money from the federal government to states and local governments. The purpose of this grant is to provide support for a wide range of programs that serve broad purposes.

These programs can include things like law enforcement, social services, public health, and community development. The block grant allows states and local governments to have more control and flexibility in deciding how to use the funds to address the specific needs of their communities.


Origins of Block Grant Programs

When the federal government makes a block grant? According to the 2014 Congressional Research Service (CRS) report, the first true block grant was available in 1966. However, there was an initial recommendation about the idea of consolidating grants into broader categories. In 1949, the Hoover Commission’s report suggested creating a grant system based on broader categories. For example, highways, education, public assistance, and public health. This suggestion opposed to the existing fragmented system.

During the Eisenhower Administration

During the Eisenhower Administration (1953-1961), the Government implemented the block grants in the fields of health and public welfare. In the 1950s, the U.S. Department of Health, Education, and Welfare (HEW) successfully consolidated child health and welfare, vocational education, and vocational rehabilitation into block grants for public health.

Despite these early developments, proposals for block grants faced repeated rejection in the 1950s. The reasons behind the rejections included political differences between the federal and state levels, concerns about reduced federal control. Also, the belief that granting states greater flexibility in spending would lead to a more efficient and effective use of public funds.

In the late 1960s, when the Democratic Party controlled both Congress and the White House, significant legislative acts were passed. In 1966, the Partnership for Health Act was enacted. Also, there was the Omnibus Crime Control and Safe Streets Act of 1968 (Safe Streets Act) enacted.

Before the Establishment of Medicaids

During the 1950s and 1960s, before the establishment of Medicaid in 1965, healthcare providers were reimbursed based on a per-capita basis. However, once the allocated funds were exhausted, states had to find ways to reduce healthcare costs. For example, by limiting who could access care and the amount of care provided. Consequently, only 3.4 million people in the United States had access to these benefits before Medicaid was introduced.

During the Nixon and Reagan Administrations

During the Nixon Administration (1969-1974), a new strategy called “special revenue sharing” was developed. After that, the government implemented it from 1972 to 1986 as an alternative to block grants. Under this approach, the United States Congress allocated federal tax revenue to be shared with states, cities, counties, and townships. In the fiscal year 1986, the federal government distributed $4.5 billion to around 39,000 municipalities. This report is from The New York Times.

However, revenue sharing lost support from the federal government under the Reagan administration. In 1987, it was replaced by block grants, but in smaller amounts. When the federal government makes a block grant? President Reagan’s 1981 Community Services Block Grant consolidated 77 existing anti-poverty grants into nine new block grants, with a budget that was approximately 25% less than the programs they replaced.

When the Federal Government Makes a TANF Block Grant?

In 1996, there was a shift towards “nationalizing trends” in the departments of Health and Human Services (HHS) and Education, while also attempting to devolve welfare policy. As the part of this shift, The Congress then introduced the Temporary Assistance for Needy Families or TANF as block grant. It was to replace the Aid to Families with Dependent Children Program.

The Advisory Commission on Intergovernmental Relations (ACIR), which provided expertise on federal intergovernmental matters, played a significant role in the design and establishment of various intergovernmental policy initiatives, including block grants. However, in 1996, the ACIR was removed.

The Commerce Department Under President Bush

In the FY 2005 budget under President Bush, several federal programs were converted into block grants, resulting in savings of $1.8 billion. For example, eighteen community development block grant programs were consolidated into one program under the Commerce Department.

According to a 2013 report by the Center for American Progress, both categorical grant funding and block grant funding decreased for many states between 2008 and 2013.

Examples of Significant Block Grant Initiatives in History

Let’s take the example of a block grant program for Medicaid. In this program, each state would receive a fixed amount of money from the federal government. The government determined the specific amount of money in two ways: either based on the population (“per capita”) or based on the specific needs of the state.

However, if the state’s spending exceeds the amount set by the federal government, the state will have to cover the additional expenses using their own funds. This means that if there is a difference between what the state needs and what the federal government provides, the state will have to fill that funding gap on their own.

Converting Medicaid Into Block Grant

Block grants have been a topic of debate in the United States. According to a 2014 report from the Congressional Research Service (CRS), advocates of converting Medicaid into a block grant argue that it can help reduce the federal deficit, increase government efficiency, redistribute power, improve accountability, and allow for more flexibility in program implementation.

On the other hand, critics, who oppose converting Medicaid into block grants, argue that they undermine the achievement of national objectives and result in reduced government spending on domestic issues.

They express concerns that vulnerable groups such as seniors, individuals with disabilities, and low-income children could lose access to healthcare due to significant cuts in Medicaid funding. Critics argue that block grants’ decentralization makes it more challenging to assess the effectiveness of these grants and to hold state and local government officials accountable for their decisions.

In February 2017, there was a significant national debate in the United States about whether to convert Medicaid into a block grant program. This debate gained more attention as the United States Congress deliberated on this issue.

According to an article published on January 11, 2019, by Politico, the Trump Administration was working on new guidelines to revamp Medicaid in order to reduce healthcare costs for individuals with low income through the use of block grants. The changes was there without the participation of the Congress.

The article mentioned that Seema Verma, the Administrator of the Centers for Medicare and Medicaid Services (CMS), had discussed the possibility of pursuing block grants during a meeting with state Medicaid directors in the fall of 2018. Verma has been a proponent of block grants, but her attempts to include block grant language in federal guidance have faced scrutiny from CMS lawyers.

Benefits of Block Grants

After finding some important information to answer your question about when the federal government makes a block grant, here are some advantages or benefits to know about block grants:

1. Flexibility and Innovation

According to a March 2017 article in the New England Journal of Medicine, local government officials, compared to federal officials, are closer to the needs of the people they serve. This proximity allows them to better identify local needs.

Advocates of block grants argue that they provide an opportunity for local governments to experiment with innovative approaches to solving various problems. Other state and local officials can then learn from these experiments. If funding were only given through strict categorical grants, this kind of flexibility and innovation wouldn’t be possible.

2. To Empower Local Governments

According to a report by the U.S. Advisory Commission on Intergovernmental Relations (ACIR) in October 1977, block grants are a way to empower local governments and encourage problem-solving at the local level.

The General Accounting Office reported that the number of federal block grant programs increased from 450 to 700 between 1980 and 2001. These grants covered a wide range of activities, including education, healthcare, transportation, housing, and counter terrorism.

According to a 2017 study by the Center on Budget and Policy Priorities (CBPP), funding for major block grants related to low-income health, housing, and social services has experienced a 37% reduction since 2000. It happened because of the adjustment of inflation and population growth. This significant decline in funding can be attributed to the fundamental structure of block grants.

Because block grants provide local governments with flexibility in how they use federal funds, recipients have the option to save or allocate the funds to other areas. Consequently, it becomes challenging to track the specific use and impact of these funds. As a result, block grants are vulnerable to funding reductions or freezes.

In 2003, the state Homeland Security Grant Program and Critical Infrastructure Protection distributed funds. They allocated the fund for the states based on formulas that favored small states. For example, Wyoming, the least populous state, received $17.5 million, while California, the most populous state, received $164 million.

In the following fiscal year, the Government guaranteed Wyoming with at least $15 million, while California received $133 million. This resulted in Wyoming receiving $35.3 per person, compared to California’s $4.7 per person. Similar patterns exist in other block grant formulas, to support the small states.

Criticisms and Challenges of Block Grants

It’s essential to mention that individual states can also allocate block grants to their subdivisions. For instance, counties, towns, and school districts. Nevertheless, even though there are theoretical arguments supporting block grants, research has commonly discovered them to be ineffective in accomplishing policy goals.

1. Federal Government Has Limited Ability to Evaluate Block Grants

Critics of block grants argue that the flexibility they provide to local governments limits the ability of federal administrators. So, they cannot evaluate the effectiveness of these programs. Additionally, since there are often no federal requirements for uniform data collection across states, it becomes challenging. It is hard to assess the impact and effectiveness of block grant programs.

Opponents also express concerns that the lack of restrictions on how local officials can spend block grant funds. There is a great possibility how the communities with greatest need to communities with the most political influence can redirect the resources.

Furthermore, critics argue that block grant funding is susceptible to diminishing over time. Well, it is more difficult to sustain political support for broad-purpose, state-run programs compared to categorical programs that focus on specific purposes.

In 2009, Carl Stenberg stated that block grants could grant greater flexibility to the intergovernmental system. However, people often overestimate and find it difficult to realize their potential. He pointed out that there is no empirical evidence supporting the claim that block grants reduce administrative costs. They merely transfer these costs from the federal government to the recipient states.

2. Lowest Average Score Based on PART

A 2009 report by the U.S. Office of Management and Budget indicated that block grants received the lowest average score. This report was based on the Program Assessment Rating Tool (PART). Also, the tool was used during the George W. Bush Administration to assess the effectiveness of federal funding programs.

Block grant programs were often rated as “results not demonstrated” or “ineffective.” However, block grant advocates argue that the PART is not a suitable measure for evaluating block grant performance. It primarily examines programs with a single outcome, while block grant programs often have multiple, potentially conflicting outcomes.

According to a 2014 Congressional Research Service (CRS) report, the Government funded 21 block grants. The total was about $50.8 billion in FY 2014. This data showed less than 10% of total federal grant-in-aid assistance. The report presented arguments from both sides of the debate regarding block grants. Supporters of block grants claim that they are more cost-effective. The reason because they reduce federal administrative costs associated with state and local government paperwork requirements.

3. The Federal Funds for Unrelated Matters

A June 2015 report by the Center on Budget and Policy Priorities highlighted that the amount of basic assistance provided by block grants has decreased. The local governments use their federal funds for other purposes. For example, in 2015, only half of the funds received from the TANF block grant were for the core welfare reform activities. Meanwhile, the rest were for various unrelated matters.

The CBPP study emphasized the responsiveness of entitlement programs. For example, Medicaid and SNAP to changes in need, contrasting them with block grants. Entitlement programs adjust automatically and immediately in response to increased need, which is crucial during recessions. Converting these programs into block grants would compromise their ability to provide a rapid and effective response to changing circumstances.


In conclusion, block grants play a significant role in the relationship between the federal government and states. It provides a funding mechanism that empowers states to address their unique needs and challenges. These grants offer flexibility and autonomy to states. This allow them to tailor programs and services to their specific contexts, promote innovation, and make localized decisions. The consolidation of funds through block grants can streamline administrative processes and reduce bureaucratic burdens, fostering efficient resource allocation.

However, evaluating the impact of block grants is crucial to understanding their effectiveness and identifying areas for improvement. Evaluations should assess program effectiveness, efficiency, equity, and access, as well as gather stakeholder perspectives. This evaluation process enables policymakers and stakeholders to make informed decisions, improve program outcomes, and ensure accountability.

While block grants offer benefits, they also present challenges. States may need to bridge funding gaps, potentially leading to reduced services or increased financial burdens. Disparities among states in funding and outcomes can arise if allocation formulas do not adequately consider variations in needs and resources. Balancing state flexibility with federal oversight and ensuring equitable access to services are ongoing considerations in the design and implementation of block grant programs.

In summary, block grants provide states with the opportunity to take ownership of their programs, respond to local needs, and promote innovation. Evaluating the impact of block grants is essential to understanding their effectiveness and making data-driven decisions. With careful monitoring, block grants can continue to serve as a valuable tool in federal-state relations. It encourages collaboration, and promotes efficient and tailored approaches to address diverse challenges across the nation.