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Block Grant Program
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Blackwell, Morton: Files
Folder Title: Block Grant Program
Box: 2
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
National Archives Catalogue: https://catalog.archives.gov/
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
March 20, 1981
PRESS BRIEFING
BY
RICHARD HODES AND ROSS DOYEN
OF THE NATIONAL CONFERENCE OF STATE LEGISLATURES
AFTER MEETING WITH THE PRESIDENT
5:05 P.M. EST
MS. SMALL: Good afternoon, folks. I'd like to introduce
two people to you today. First of all, Richard Hodes who is
President of the National Conference of State Legislatures. He is
a Democrat of Florida. He is Majority Leader of the Florida House.
Also, Ross Doyen is the President-elect of the National Conference
of State Legislatures. He is a Republican from Kansas and he is
President of the Kansas State Senate and they'll talk to you for a
couple minutes and then take questions.
MR. HODES: We spent -- in fact, this is not our first
trip with the President on the issue of federalism and we were back
today to again visit with the President on the issue of federalism.
This time we were accompanied by the leadership of the legislatures
of almost all 50 states.
The basic issues which the President raised were the
same that we've heard from the President which are those which this
Conference supports and that is that federalism is a goal of the
states and has been for many years and we're supportive of that and
supportive of the President in that position.
In a response to the President, we did raise the question
that in recent days on Capitol Hill we have been hearing that the
administration spokesmen have been backing away a little bit from
some of the federalism issues that the President originally presented
and we have expressed our concerns. We are concerned specifically
in some areas such as Medicaid where there seems to be a retreat from
the concepts of maximum flexibility in administration of the Medicaid
program and that retreat in the face of the Medicaid cuts that are
proposed in the budget are something that we feel the states cannot
live with.
Secondly, we are concerned about the retreat in the
categorization concepts in the education programs. We feel that there
is some step back toward categorization again. So, we have expressed
our concerns to the President in that respect. The President responded
that this is a part of the negotiating process and that it's interim
and that his final goals have not changed and that the ultimate flex-
ibility, block granting to the states is the administration's position.
We respect that position, but we certainly hope that the administration
will pursue that goal and not allow itself to be chipped away at and
allow these programs to become categorized to the extent that the
states could not in any way support any form of budget cut. We can
support some budget cuts with the flexibility in block granting.
Cuts are fairly deep, but with categorization -- with
decategorization we can do rather well. The thing we are opposing
and that we're concerned about now is before we really got the
consolidation of grants and before we really got a strong expression
for block grants there is a sense that we may be facing recategorization,
remandating and reduction.
MORE
- 2 -
We don't think that's what we want. We will accept some
reduction, but we certainly have to have the flexibility to administer
these programs and target the dollars effectively if program cuts
can take place at all. Otherwise, the result will be that the states
will not be able to meet their obligations and the local governments
will end up paying the bills and local government is the place where
the money is the tightest. So, we would hope that flexibility does
remain the basic part of the administration package.
Q
What have you been hearing that administration
spokesmen have been saying on the Hill?
MR. HODES: Well, we get presentations that the education
grants, for example, in special education programs and in comp-ed
programs, Title I programs would be kept separately categorized,
go directly to local school districts and bypass state capitols. This
would be a very difficult process for us because it would require
restructuring entirely our equalization funding formulas as they
now exist in the states. And that the Medicaid flexibility would only
be available after the states get in line with applications for
waivers in order to achieve flexibility in certain specified areas,
or to go back and reprogram the entire Medicaid program state-by-state
and have that submitted and reviewed for approval.
MORE
- 3 -
That's something we can't live with. That is not
the way we understood program consolidation and block granting.
I
But the President's explanation was that this
was an interim -- what? Argument on behalf of the administration?
MR. HODES: I didn't know whether that was an
interim argument or something that we would do for now --live
with the cuts and then come back in a couple of years and get it
again. The timeframe was clear in his response. So that does
male us a little nervous because it can't go on this way with
those kinds of -- with a five percent cap. We can't retain what
now exists, and that is the very tight program that now exists
with all the rules and regulations tied in with it. All that will
mean is that a lot of people will be ending up in hospital emergency
rooms for local governments to take care of. And we just don't
think that will work. So, we've got to have a flexibility with
the budget.
He said his intent is to keep it together as a package.
So, I hope that's what we have. If we have that, we can accept some
of the cuts. The caps are tight, would be particularly tough in
growth states, but it is something we can work with if we have the
flexibility to target the dollars properly. I don't want to pre-empt
Senator Doyen so I'd like to give him an opportunity to make some
remarks.
SENATOR DOYEN: Well, I was pleased to have the opportu-
nity to have this discussion with the President, of course, this
afternoon and it was reassuring to me to hear him restate his
position in regard to the economic recovery plan that he's put
forth back here before the Congress and also to restate his position
in regard to regulatory reform. This is something that the states
are very, very much interested in because the regulations that we
have in many of these categorical grants are almost impossible to
survive under.
And it was pleasing -- it's almost like a breath
of fresh air to hear the President talk about federalism -- returning
some of the control back to, the states. I'm more than willing
to accept my responsibility to make these adjustments, even though
they are reductions, in attempt to do all we can to make this
government, as great as it has been, and maybe even greater in
the future. And the President did indicate that his philosophy
still is to have a block grant with some flexibility and not too
many restrictions. And I'm confident that the states can accept
that, accept some major reductions and still provide the services
to the citizens of our state if we can determine the eligibility
and the things of this nature that go with those block grants.
I'd be more than happy, and I'm sure Representative
Hodes would too, to respond to questions.
I
Senator, don't you believe that these cuts
coupled with the return of control to the states is necessarily
going to require higher spending at your level?
SENATOR DOYEN: No, I would say there would be a
reduction in spending because we feel that we're spending dollars
on programs now that really aren't that beneficial to our people
and if we weren't required to do that type of a spending program,
we probably wouldn't be in the program to begin with.
I
Such as school lunch programs?
SENATOR DOYEN: We feel that there are a lot of
people qualifying for the school lunch programs that shouldn't
MORE
- 4 -
qualify. At the present time, there's very little restrictions
on that. You just go down and make an application. There's no
check. There's no accuracy lots of times determined in those
reviews and they just, for lack of any ability to determine
whether the child is eligible for a reduction or for the Food
Stamp or whatever, we just go ahead and pay it, and I think
it's wrong.
Q
Were the mass transit cutbacks discussed in
the meeting?
MR. HODES: We did not discuss with the President
those particular problems. We are sensitive to them, however,
and again, we are concerned that the mass transit, particularly
the operating grant eliminations, would be a serious detriment
to the urban states in the Northeast. What we feel, again, is
that the block granting concept would help a great deal. So if
we could combine the highway grants, the mass transit grants,
and transportation grants in general, to those states that felt
that they had to target more dollars to operating grants for
mass transit, could then do so.
Those states such as Kansas and my own in Florida
might well feel that it needs to use more of its dollars for
maintenance programs of its federal highways, and we in Florida
particularly feel that this is a particular problem. The point
I'm making is that the block grant would allow us to make those
particular types of decisions without necessarily having
to be concerned about whether the dollar, as it left Washington,
was intended for an operating grant for mass transit or for
a bridge repair.
We hope that the cut doesn't represent too great
a percentage of the overall cut. One of the most serious fiscal
situations in almost every state today deals with transportation.
That's because traditionally the gasoline has been levied on a
unit basis.
MORE
- 5 -
That unit basis, of course, has eroded as inflation has increased
and the tax itself hasn't and gasoline consumption has not necessarily
increased and certainly not at the rate of inflation, thank goodness.
So, what we're faced with there is that every state
has a semi-transportation crisis facing it. And a serious cutback
in transportation dollars is going to be one of the major problems
that we have to face. I am only hoping that if we do have to take
some cut in
+ransportation money that those cuts would be --
with a true block grant principle. I'm not hearing that at the
present time and that again is one of the concerns that I've
expressed. But we didn't get into the transportation, per se,
in this afternoon's discussion.
Q
Why didn't you bring that up?
MR. HODES: Frankly, the education and
social issues were more clearly on my mind at that moment and in
the very brief time of that type of a presentation, I really
couldn't get into all the various phases which concern me.
I am hoping that the administration will stay with
this principle of block grants and not allow these things to be
fragmented. We're even concerned about the Social Service Program
being in four or five different categories. That, in itself, is
just the beginning of additional loss of flexibility. It'd just
take a little greater effort to chop it up a little bit more and
add a few regulations and we're back to square one again.
So, we are hopeful that we can keep the administration
on its goal. When you think about it, the legislators and the
governors are the only constituency that's out there today and
we represent the people of our states-- the only constituency
there today that's saying, "Don't cut my little bittie program."
We're saying, "Just cut your programs as you have to, but keep
it put together." That's the point we made.
We think that for federalism there may be only one
constituency and that's the states. The other constituency, interestingly
enough, we think, is the people.
Q
If you don't get the regulatory flexibility
with Medicaid that you were talking about that you need, what will
happen if you're required to live with this five percent cut?
MR. HODES: I'll try to draw a scenario for you. I
think in my own state, we'll reduce eligibility considerably. There'll
be an additional class of people who currently fall into the notch
between being funded for their health care and are funded through
a public program that will end up as indigent usually on some local
courty or township or city program and very often not getting much
medical care until they have a crisis and ending up in the most
expensive form of medical treatment and that's the hospital emergercy
roon. That's paid for by two people, either the local property
MORE
- 6 -
taxpayer or sick people who are in the hospital, who have their
bill increased so that a hospital can keep that emergency room going.
So we do levy sick taxes even though we don't levy the others. That's
what will happen in Medicaid plus the nursing homes where we're really
concerned in Florida.
Q
There's been some concern on the Hill expressed
that maybe some of these block grant programs wouldn't be put into
place as quickly as they might like. You might have a year's lapse
or something. What are --
MR. HODES: We clearly said that we cannot accept cuts
in budget with a delay in legislation and it's got to go together.
The President reassured us that that was his position as well.
What we're hearing on the Hill, however, is we're
looking the budgets are flying through. Well, you know, it went
through either the Senate
Budget Committee, going through the
Congress and we're looking around for the legislation that's supposed
to handle all the entitlement language that we have to deal with
if we're going to go into block grants.
We haven't seen it yet. We are on faith, at the present
time, assuming that it's going to be there.
Q
Senator Chiles from your own state
said today that he's been told particularly in education grants for
the handicapped, that one, he's been flat out told -- he says
that they cannot get
their block grants in place in time,
that there will be a year's lapse in that program.
MR. HODES: Well, a cut in funding with the mandates
as they now exist, unless there is some way to do it without
legislation, and I don't know what it is, is going to create a
problem. It has to go together. Either that or the budget has
to be held off because we just cannot administer, literally
administer and fund the programs with the kinds of cuts we have.
The states are not going to make up the difference. So the
programs will just I don't know how you would handle some of
the mandates because there are some eligibility mandates there.
The Medicaid cap is an open-ended eligibility situation.
I don't know how you handle that with a five percent cap. There are
just more sick people who don't get treatment. That's it.
Q
Was the flexibility issue the main criticism?
MR. HOADS: The main criticism we have now is that
flexibility seems to be a bit of a declining effort and that
the availability of the flexibility with the cut in the budget
may not come together. We had assurances. We received it from
the President that his plan is for those things to go together.
Now, that's a political problem that I can't address here. It's
a battle that has to be fought outon the Hill
Q
Thank you.
MR. HODES: Thank you very much.
END
5:20 P.M. EST
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ED MEESE
FROM:
PAUL WEYRICH
DATE:
MAY 11, 1981
RE:
THE IMMINENT DEMISE OF THE PRESIDENT'S BLOCK GRANT PROGRAM
As reluctant as I am to dampen the euphoria resulting from your success on
the First Concurrent Budget Resolution last week, I am concerned that what
is quietly going on in the Senate will, if unchecked. destroy the President's
economic program and turn the House fight into a Pvrrhic victory. I am
therefore taking the liberty of speaking frankly about what 1 view as an
extremely hazardous situation.
First, you need to be aware that the Left does not intend to wage its
principal battle against the President's program in connection with the Budget
Resolution. At a conference I attended a Few weeks ago, the opposition's
high command indicated, rather. the intention to savage the President's
block grant programs and bust the budget through an item-by-item reauthori-
zation and appropriation of the programs which the President seeks to abolish.
In the history of the budget process, Concress has never strictly adhered
to the figures it set in the First Concurrent Resolution. Therefore, unless
you can keep the block grant program together, the victory on the budget will
be meaningless.
Second, the Senate Labor and Human Resources Committee is preparing to
decimate your block grant program. Senator Kennedy and his staff are
bragging that they have the votes to kill all of the block grants and
replace them with reauthorizations of each and every categorical grant
program which you seek to abolish.
As an example of the Committee's mood, Senator Lowell Weicker stood up on
the floor of the Senate last week and threatened to crush the administration
if it did not back off of its opposition to Legal Services. Weicker has
also introduced a categorical grant substitute to your emergency block
grant, and the "conservative compromise" being floated in the Senate is so
full of set-asides and federally mandated stipulations that it is not worth
supporting.
Sources on the Education Subcommittee report that Senator Stafford is pre-
pared to kill your education block grant. In addition. Stafford now seems
prepared to vote against the President's program through the reauthorization
of Adolescent Pregnancy (the Kennedy version. not the Denton bill), Title 4A
of CETA, Developmental Disabilities, and other programs which are up for
reauthorization this year. and which VOD would like to get rid of. Last
week, Weicker gave Kennedy his proxy.
Continued
721 Second Street, N.E.
Capitol Hill
Washington D.C. 20002
(202) 546-3003
Ed Meese
Mav 11, 1981
Page 2
For their part, frenzied Senate conservatives are considering such self-
destructive proposals as creating set-asides within block grants for such
things as Legal Services and Community Action Programs. They are also
considering creating a separate block grant for Developmental Disabilities.
I don't need to tell you that, with this as a starting point, a liberal
committee, a non-sympathetic Senate, and a Democratic House can only proceed
to make the proposal that much worse.
Now for the bad news. There are very serious defections from the President's
proposal among the highest levels of the Republican leadership in the Senate.
A source of impeccable reliability has assured me that the consistent
opposition of Majority Leader Howard Baker to the President's social program
is substantially responsible for its problems in the Senate.
Senator Robert Dole has privately railed against the administration, and
has stated that the Senare "is not a rubrer stamp" to the President's wishes.
Of course, you have witnessed the serious datiage Vnich Dole has already
done to the social services block grant.
If these programs are allowed to come UD one DN one, the results will be the
same as occurred with the Legal Services Corporation last week, in which the
Administration was defeated by a 72 to 24 vote, with the active opposition
of Baker, Domenici, Dole, Stevens, and other senators whose support you
should expect to receive.
In my opinion, the only way to overcome this result is to lump the
President's social services proposals into a single amendment, and lobby
them as a test of the President's program. Senator Baker should be requested
in the strongest terms not to call up any bill which seeks to reauthorize
a program which is slated for destruction. With the hope or reauthorizing
individual categorical programs removed, it is my expectation that the liberals
will be more sympathetic to the block grant concept. Finally, the bill could
be moved through the House with a discharge petition.
While I understand that resting so much of the President's prestige on a
single vote is a risky strategy. I believe the alternative is certain defeat.
If the President allows his program to be destroved piecemeal by the
approval of every heart-rending program which comes along. the results will
ultimately be much more damaging.
file
To: Dick Dingman
From: Pat Buckley
re: Supporters of Block Grants Ad Hoc Group
Economic/Block Grant
6/12/81
PKq.
Pursuant to our earlier discussions, I have put together a list of 80
national groups (list attached) who publicly support the Reagan block
grant proposals as originally introduced. I supply the emphasis because
of what happened Wednesday in the Senate Labor and Human Resources Com-
mittee.
I have done a quick poll of the groups, and while I have not yet been able
to get to them all, I have not found any who will support the committee
sellout. Consequently, I am putting the press conference, at which the
existence of this list, on the back burner.
As to how the sellout came about, there is a great deal of misinformation
and rumor which I am not going to try to sort out. Suffice it to say that
the game was essentially lost when Howard Baker told Hatch and Stafford
to do whatever had to be done to get the bills out of committee, that the
package was not to be put together on the floor. Whether Baker acted on
his own or at the request of the White House is not clear. What is clear
is that his instructions were later ratified by the White House in the
form of some pressure on Hatch to get the bills in committee.
Let me be clear about what the White House agreed to: Health Services,
Preventive Health, Education, and Low-income Energy Assistance were agreed
to. As they came out of the Committee the White House supports them and
does not want them changed on the floor.
Community Services Administration, which includes Legal Services Corporation,
was not agreed to by the White House, and will be fought on the floor in
the form of a Hatch (probably) amendment.
The most troubling thing about all this is that according to what Reagan
himself told some of our people on Thursday evening, he thinks he got out
of committee 70% of what he wanted. That of course is ludicrous and indicates
real chicanery on the part of staff. I am not going to go into the shortcomings
of the sellout here, but my estimate is that he got about 20% of what he
wanted.
Obviously, this sellout has implications for other aspects of the President's
program. Many of the grass roots organizations find it much easier to rally
their troops (many of whom are, after all, conservative Democrats) in opposition
to block grants than in favor of tax cuts which won't even offset the tax
increases they are going to get. You and I understand the need for tax cuts,
but we have to sell them out in the field. If the groups feel sold out by the
block grant compromise (and they do), they are going to work much less nard
for the tax cuts.
-2
Perhaps even more immediately, this sellout might cause some conservative
Senators and/or Congressmen to vote against the reconciliation package, if
they judge the compromise to be just too much. Since most Democrats can be
expected to vote against it, it probably would not take that many defections
to kill the President's entire reconciliation package.
In view of the above points, it may be well to discuss with the groups on
the list the possibility of coming out in strong opposition to the committee
compromise, which now appears to be the White House position. If they were
to do so, that would very likely doom the reconciliation package, and might
well kill the tax cuts.
AD HOC COMMITTEE TO SUPPORT BLOCK GRANTS
1. COMMITTEE FOR THE SURVIVAL OF A FREE CONGRESS
2. AMERICAN FARM BUREAU
3. NATIONAL COALITION FOR CHILDREN
4. NATIONAL DEFENSE LOBBY
5. CONCERNED WOMEN OF AMERICA
6. CITIZENS FOR EDUCATIONAL FREEDOM
7. PUBLIC SERVICE RESEARCH COUNCIL
8. NATIONAL PRO-LIFE PAC
9. UNITED FAMILIES OF AMERICA
10. EAGLE FORUM
11. FUND FOR A CONSERVATIVE MAJORITY
12. YOUNG AMERICANS FOR FREEDOM
13. COALITIONS FOR AMERICA
14. CITIZENS FOR REAGAN
15. PRO-FAMILY FORUM
16. FAMILY AMERICA, INC.
17. FAMILY LIFE SEMINARS
18. AMERICAN LIFE LOBBY
19. RELIGIOUS ROUNDTABLE
20. CONSERVATIVE CAUCUS
21. LIMIT MARYLAND'S TAXES COMMITTEE
22. CAUCUS RESEARCH AND ANALYSIS FOUNDATION
23. GUARDIANS FOR CHILDREN IN MAINE
24. NATIONAL FEDERATION FOR DECENCY
25. CHRISTIAN FOCUS ON GOVERNMENT
26. UP WITH FAMILIES
27. MICHIGANS FOR BIBLICAL MORALITY
28. LIFE AMENDMENT PAC
29. AMERICAN LEGISLATIVE EXCHANGE COUNCIL
30. UNITED FAMILIES OF MARYLAND
31. MORAL MAJORITY
32. COMMITTEE TO PROTECT THE FAMILY
33. CHRISTIAN FAMILY RENEWAL
34. FAMILY AND FREEDOM FOUNDATION
35. FREE THE EAGLE
36. ASSOCIATION OF CHRISTIAN SCHOOLS INTERNATIONAL
37. COMMITTEE FOR RESPONSIBLE YOUTH POLITICS
38. TRANSNATIONAL ASSOCIATION OF CHRISTIAN SCHOOLS
39. CHRISTIAN SCHOOL SERVICES, INC.
40. NATIONAL ASSOCIATION OF PRO-AMERICA
41. CONSERVATIVES AGAINST LIBERAL LEGISLATION
42. CHRISTIAN VOTERS VICTORY FUND
43. NATIONAL CHRISTIAN ACTION COALITION
44. NATIONAL CONSERVATIVE PAC
45. PROTECT AMERICA'S CHILDREN
46. NATIONAL TAX LIMITATION COMMITTEE
47. AMERICANS FOR CONSTITUTIONAL ACTION
48. COUNCIL OF STATE CHAMBERS OF COMMERCE
49. PENNSYLVANIA TAX LIMITATION COMMITTEE
50. EXECUTIVE FORUM
51. NATIONAL ASSOCIATION FOR PRIVATE SCHOOLS
52. COUNCIL FOR EDUCATIONAL FREEDOM
53. CITIZENS FOR EDUCATIONAL FREEDOM
54. ASSOCIATIONS OF INDUSTRIES OF MASSACHUSSETTS
55. EDUCATION VOUCHER INSTITUTE
56. MID-AMERICA CONSERVATIVE PAC
57. IOWA CONSERVATIVES
58. WOMEN FOR RESPONSIBLE LEGISLATION (FLA.)
59. UNIVERSITY PROFESSORS FOR ACADEMIC ORDER
60. CONSERVATIVE VICTORY FUND
61. KING INFORMATION SYSTEMS
62. ILLINOIS CITIZENS FOR FAMILY LIFE
63. CONCERNED WOMEN'S COALITION
64. LEAGUE OF LADY VOTERS
65. CITIZENS FOR LIMITED TAXATION
66. CALIFORNIA FARM BUREAU
67. CALIFORNIA TAX COMMITTEE
68. MARYLAND TAXPAYER COALITION
69. NATIONAL ASSOCIATION OF PROFESSIONAL EDUCATORS
70. S.T.O.P. FORCED BUSING
71. UNITED PARENTS UNDER GOD
72. COUPLE TO COUPLE LEAGUE
73. FOUNDATION FOR LIFE
74. PRO-FAMILY COALITION
75. THE LIFE ADVOCATE
76. HOLIDAY INNS, INC.
77. NATIONAL ASSOCIATION OF REALTORS
78. NATIONAL CONSERVATIVE FOUNDATION
79. PUBLIC ADVOCATE
80. NEW YORK STATE CONSERVATIVE PARTY
tile - Blockvoute
,
NEWS
U.S. Senator
HOWARD BAKER
of Tennessee
4123 Dirksen Bldg.
Washington, D.C. 20510
202-224-9683
FOR IMMEDIATE RELEASE
WASHINGTON, June 29 - - U.S. Senate Majority Leader
Howard Baker today said he wholeheartedly endorses President
Reagan's block grant program and pledged to find an appropriate
vehicle to attach the remainder of the proposal.
"I regret that the reconciliation bill did not include
the entire block grant and did not allow the Senate to vote it
up or down," Baker said. "I am committed to finding another
vehicle to attach the remainder of the program and have the
issue fully debated by the Senate. "
Baker said his political philosophy has been based on
the concept of reversing the trend of government, directing more
control to state and local governments.
"I have always felt that the proper mix of revenue sharing,
extensive block grant programs and a greatly reduced categorical
grant program would best serve the needs of the country. "
-30-
AD HOC Committee TO SUPPORT BLOCK GRANTS
/
AMERICAN FARM BURCAU
2
AMERICANS FOR CONSTITUTIONAL ACTION
3
AMERICAN LEGISLATIVE EXCHANGE COUNCiL
4
AMERICAN LIFE LOBBY
5
ASSOCIATION OF CHRISTIAN SCHOOLS INTERNATIONAL
6
ASSOCIATIONS OF INDUSTRIES OF MASSACHUSSETTS
7
CALIFORNIA TAX Committee
8
CALIFORNIA FARM BUREAU
9
CHRISTIAN FAMILY RENEWAL
10
CHRISTIAN Focus ON Government
11
CHRISTIAN School Services, INC.
2
CHRISTIAN VOTERS ViCTORY FUND
13
citizens FOR EDUCATIONAL FREEDOM
4
Citizens FOR Limited TAXATION
15
Citizens FOR Reagan
6
COALITIONS FOR AMERICA
17
COMMITTEE To PROTECT The FAMILY
18
COMMITTEE FOR RESPONSIBLE Youth Politics
19
Committee FOR THE SURVIVAL OF A FREE Congress
20
CONCERNED WOMEN OF AMERICA
21
CONCERNED WOMEN'S COALITION
22
CONSERVATIVES AGAINST LIBERAL LEGISLATION
23
THE CONSERVATIVE CAUCUS
24
THE CONSERVATIVE CAUCUS RESEARCH ANALYSIS - EDUCATION FOUNDATION
25
CONSERVATIVE ViCTORY FUND
26
COUNCiL FOR EDUCATIONAL FREEDOM
27
COUNCiL OF STATE CHAMBERS OF COMMERCE
28
COUPLE TO COUPLE LEAGUE
29
EAGLE FORUM
30
EXECUTIVE FORUM
31
EDUCATION VOUCHER INSTITUTE
32
FAMILY AMERICA, INC.
FOUNDATION
33
FAMILY AND FREEDOM
34
FAMILY LiFE seminars
85
FOUNDATION FOR LiFE
56
FREE THE EACLE
37
FUND FOR A CONSERVATIVE MAJORITY
38
GUARDIANS FOR CHiLDREN iN MAINE
39
HOLIDAY INNS, INC.
40
ILLINOiS CiTiZENS FOR FAMILY LIFE
41
IOWA CONSERVATIVES
42
KiNG INFORMATION SYSTEMS
43
LEAGUE OF LADY VOTERS
44
THE LiFE ADVOCATE
15
LiFE AMENDMENT PAC
46
LiMiT MARYLAND'S TAXES COMMiTTEE
42
MARYLAND TAXPAYER COALITION
18
MICHIGANS FOR BiBLiCAL MORACiTY
49
MiD- AMERICA CONSERVATIVE PAC
50
MORAL MAJORITY
5
NATIONAL ASSOCIATION OF PRO- AMERICA
52
NATIONAL ASSOCIATION of PROFESSIONAL EDUCATORS
53
NATIONAL ASSOCIATION For PRIVATE SCHOOLS
54
NATIONAL ASSOCIATION OF REALTORS
55
NATIONAL CHRISTIAN ACTiON COACITION
56
NATIONAL DEFENSE LOBBY
57
NATIONAL FEDERATION FOR DECENCY
58
NATIONAL COACITION FOR CHILDREN
59
NATIONAL CONSERVATIVE FOUNDATION
60
NATiONAL CONSERVATIVE PAC
61
NATIONAL PRO-LiFE PAC
62
NATIONAL TAX LiMiTATiON COMMITTEE
63
NEW YORK STATE CONSERVATIVE PARTY
64
PENNSYLVANIA TAX LIMITATION COMMITTEE
65
PRO- FAMILY coacition
66
PRO- FAMILY FORUM
67
PROTECT AMERICA'S CHILDREN
68
PUBLiC ADVOCATE
69
PUBLiC SERVice RESEARCH COUNCIL
70
RELiGious ROUND TABLE
71
S.T.O.P. FORCED. Busing
72
TRANSNATIONAL ASSOCIATION oF CHRiSTiAN SCHOOLS
73
UNITED FAMILIES OF AMERICA
OU
UNITED FAMILIES OF MARYLAND
75
UNITED PARENTS UNDER GOD
76
UNIVERSITY PROFESSORS FOR ACADEMIC ORDER
77
UP WITH FAMILIES
78
WOMEN FOR RESPONSIBLE LEGISCATION
79
YOUNG AMERICANS FOR FREEDOM
Eighty generally conservative organizations have formed an ad hoc
committee to support and push for passage of the entire presidential
block grant program. This group includes conservative organizations
from the business, religious, social issue and the political com-
munities. It is significant because it is the one part of the
president's four part economic recovery program that all of the
groups within this ad hoc committee do support. This part of Reagan's
program clearly enunicates a long term principle of a conserva-
tive philsophy of government. As the president said in his inaugral
address: "We must remember that it was the states that formed the
federal government, not the other way around.
Although other parts of the President's program include conservative
changes in the federal government, this is the only part that pro-
vides a change in the institutional framework of government. Namely,
putting the decision making authority over governmental programs
closer to individual people by giving authority to states and/or
local governments. This reverses a fifty year trend and is con-
sistent with a theme of the Presidents campaign in which he
promised to get the federal government off the backs of the American
people. The block grant proposals carry forward President Reagan's
longstanding advocacy of a renewed federalism. This is good public
because
policy 1 for too many years Congress has had a full plate of programs
now existant in the federal government. The President's proposal
will lighten the load on Congress by shifting authority over 87
programs to the states. This will allow Congress more time to review
plus
the remaining 400 programs.
-2-
The block grant proposals allow reduction in the vast amount of federal
paperwork and bureaucracy. This will immediately save tax payers
money. Additional savings will result from closer scrutiny by state
and local government of the programs to be folded into the block grants.
These savings will come from elimination of waste, fraud and abuse leaving
more money for the programs themselves.
Another benefit of block grants is that it unplugs the special interests
from the federal treasury by removing the decision making authority
to the states. Block grants will require the special interst groups
to work in 50 locations to affect policy changes instead of Washington
D.C. alone. This will substantially reduce the power of these special
interest groups that has built up over the past 50 years. It will also
reduce their ability to obtain taxpayer monies to carry out their private
left-wing
Magendas. It is interesting to note that most of the 63 liberal groups
who are opposed to block grants are federally funded organizations or
receive federal grants and/or contracts. This contrasts with our ad hoc
committee of 80 groups, the vast majority of whom do not accept federal
funds. We have no conflict of interest in taking a positive position
for block grants.
It is interesting to note how powerful these special interests are
because they have been able to frustrate implementation of the President's
programs by bottling up in committee the majority of his original block
grants.
We have been promised by Senator Majority Leader, Howard Baker that he
will provide a procedure in the Senate whereby the President's block
grant: programs, which have not been included in other pending legislation,
may be voted upon. This will give the taxpayers an opportunity to have
-3-
their senators vote on Reagan's pure block grant proposals and to
determine whether there will indeed be a change from the last
50 years worth of business as usual.
The 80 groups in the ad hoc committee are fully committed to enactment
of the block grant program and many groups have their own newspapers,
newsletters and systems for alerting their members when the block grant
program is scheduled for action by Senator Howard Baker in the Senate.
5/22
FOR IMMEDIATE RELEASE
CONTACT: John Carr
(202) 333-0822
(301) 839-2496
63 NATIONAL ORGANIZATIONS
WARN OF "DEVASTATING CONSEQUENCES" OF BLOCK GRANT PROPOSALS
(Washington) -- More than sixty major national organizations expressed "deep
concern over the potentially devastating consequences of the Administration's
block grant proposals." In a letter to Congress the 63 organizations said
"these block grant proposals repeal landmark legislation, eliminate essential
programs and undermine principles of fiscal accountability and lay the ground-
work for confusion, neglect and new bureaucracy at the state level."
The League of Women Voters, National Urban League, Lutheran Council, American
Association of Retired Persons, Children's Defense Fund, National Education
Association, and United Auto Workers joined 56 other organizations in predicting
that "untargeted, undirected, unmonitored and unexamined block grants will mean
far less assistance to those who need these services. "
The organizations are part of an ad hoc coalition on block grants raising basic
questions about the block grant proposals. "These proposals would undermine
entitlements, civil rights and other safeguards, remove application and targeting
requirements and eliminate maintenance of efforts and citizen participation pro-
visions and a host of other accountability tools. Many believe these proposals
-more-
-2-
are the first steps in a strategy of abandonment of federal involvement in
meeting human needs," the groups declared.
"We fear that turning less money over to states without clear priorities,
direction or strategies will undermine national goals in health, education,
social services, community development and energy assistance," they said.
"These proposals will certainly mean two things: less assistance to those in
genuine need in these areas and a brutal political struggle at the state level
where the most vulnerable and those without clout are almost certain losers,"
they declared.
-30-
(For additional information about the activities of the block grant coalition,
contact John Carr at (202) 333-0822).
May 14, 1981
Dear Senator /Representative:
We the undersigned 65 organizations wish to voice our deep concern
over the potential devastating consequences of the Administration's block
grant proposals. We fear that turning less money over to states without
clear priorities, direction or strategies will undermine national goals in
health, education, social services, community development and energy
assistance. These proposals will certainly mean two things: less assistance
to those in genuine need in these areas and a brutal political struggle at
the state level where the most vulnerable and those without clout are almost
certain losers.
These block grant proposals repeal landmark legislation, eliminate
essential programs and undermine principles of fiscal accountability and lay
the groundwork for confusion, neglect and new bureaucracy at the state level.
Without defending every categorical program, we can predict that untargeted,
undirected, unmonitored and unexamined block grants will mean far less assis-
tance to those who need these services, despite rhetorical commitments to the
"truly needy" and "the social safety net."
We call on Congress to thoroughly examine the troubled history and per-
formance of block grants, the strengths and weaknesses of the categorical
programs they would replace and most importantly, evaluate and consider the
impact of these proposals in meeting the needs of people. These proposals
- would undermine entitlements, civil rights and other safeguards, remove appli-
cation and targeting requirements and eliminate maintenance of efforts and
citizen participation provisions and a host of other accountability tools.
Many believe these proposals are the first steps in a strategy of abandonment
of federal involvement in meeting human needs.
We urge you to resist the pressure to treat these proposals as simply
budget issues. They are far more. They represent a radical shift. They
deserve full, fair and thorough consideration focused on what they would mean
for families and individuals in need of these services. Hasty or superficial
action would ignore the broad dimensions of this shift and the enormous
consequences for our society.
We stand ready to participate in this important national discussion.
Sincerely,
-2-
American Association of Retired
Lutheran Council in the USA, Office
Persons
for Governmental Affairs
American Baptist Churches of the
National Association of Community
United States
Based Organizations
American Friends Service Committee
National Association of Community
American Nurses Association
Cooperatives
American Public Health Association
National Association of Neighbor-
hoods
Association of Community Organizations
for Reform Now (ACORN)
National Association of Social
Workers
Association for Retarded Citizens
National Center for Urban Ethnic
Center for Community Change
Affairs
Citizen Labor Energy Coalition
National Conference of Catholic
Charities
Children's Defense Fund
National Congress for Community
Children's Foundation
Economic Development
Civic Action Institute
National Congress of Neighborhood
Women
Community Information Service
National Consumer Law Center
Community Nutrition Institute
National Council of Community
Congress of Neighborhood Women
Mental Health Centers
Consumer Coalition for Health
National Council of Jewish Women
Consumer Law Project
National Council of LaRaza
Family Service Association of America
National Council of Senior Citizens
Food Research and Action Center (FRAC)
National Education Association
Gray Panthers
National Employment Law Project
National Hispanic Housing Coalition
Housing Assistance Council
National Office of Jesuit Social
Information Center for Handicapped
Ministries
Individuals, Protection and Advocacy
System
National Retired Teachers Association
League of Women Voters
National Rural Housing Coalition
Low Income Housing Coalition
National Treasury Employees Union
-3- -
National Urban Coalition
National Urban League
National Youth Work Alliance
Neighborhood Coalition
Parents Without Partners
Planned Parenthood
Rural America
Rural Coalition
Rural Housing Coalition
Southern Council of Low Income Elders
United Auto Workers
United Cerebral Palsy Association
United Methodist Church, Department of
Human Welfare, Board of Church and
Society
United Presbyterian Church, Washington
Office
Vietnam Veterans of America
Working Group on Community Development
Reform
Wider Opportunities for Women
Young Women's Christian Association, of
the USA, National Board
BLOCK GRANTS
A STRATEGY OF ABANDONMENT
"I have a dream of my own. I think block
grants are only the intermediate steps.
I dream of the day when the federal govern-
ment can substitute for those the turning
back to local and state governments of the
tax sources we ourselves have preempted here
at the federal level so that you would have
those tax sources."
President Ronald Reagan
Washington Post, March 10, 1981
While much of the nation's attention is focused on the debate in the
Congress and country over the Reagan budget, a more significant battle is
shaping up over the Administration's plans to kill dozens of federal programs
and replace them with a series of "block grants" to be administered by the
states with virtually no national priorities, direction or guidelines.
Under the guise of "increasing flexibility" and "economic restraint,' the
Administration is advocating a radical program designed to reduce and finally
eliminate federal involvement in health, education, social services and other
major areas of national need.
The Administration seeks to consolidate or eliminate dozens of programs,
reduce funding by 25% and establish several state block grants in health, social
services, education and other areas. These proposals will surely mean two things:
(1) less assistance to needy families in areas of health, social services,-
education and emergency assistance; (2) a brutal political struggle at the state
level where the poor and others without clout will often be the losers.
The Administration's block grant proposals contain virtually no require-
ments to focus on those in need, no citizen participation mandates, no civil rights
protections, no quality standards or priorities. There is no requirement that
these federal funds not be used to substitute for state funds or "maintenance of
effort" provisions. These proposals include no involvement for state legislatures,
no application or planning process, no federal evaluation procedures or basic
accountability principles.
As a part of the block grant process, the Administration proposes to repeal
the Child Welfare Act, the Child Abuse and Neglect Act, the Right to An Education
for Handicapped Children Act, major portions of the Equal Opportunity Act and
several other major laws. These bipartisan and hard-fought laws provide far more
than money for programs, they establish standards and models for states and local
government. Far more is at stake in this battle than budget cuts.
Many of these programs were established after documented neglect an:
abuse at the state level. 1: many cases. states have been unwilling or unable
to meet the needs of disadvantared students. black lung Vict
children, to name just three. It is unlikelv that their needs
turning over less money to states with no accountability, priorit
direction.
The Administration says the cuts are justified by administrative savings
resulting from consolidation. The General Accounting Office points out that
administrative costs averaged 4% in 31 education programs which will be cut by
25%. The 26% cut in health programs is more than 4 times the current total
administrative costs of the 26 health programs at federal, state and local levels.
In fact, GAO has said that administrative costs could increase as 50 state
bureaucracies are established to administer the block grants.
Ironically, this Administration which has made rhetorical commitments to
the "truly needy" and a "social safety net," is replacing highly targeted
programs such as educational aid to the disadvantaged (Title I) with unfocused,
untargeted block grants which set no priorities based on need. The process for
allocating funds is far more likely to respond to political clout than human need.
It will set older citizens against poor families, child care advocates against the
handicapped in a desparate political battle over reduced resources.
These block grant proposals set the stage for even deeper cuts and less
accountability in the future. By their design, they eliminate entitlements, set
constituencies against one another and reduce accountability. The Administration
must cut more than $70 billion more by 1984 to reach its budget goals. They have
already made clear their desire to eliminate federal involvement in these areas.
The block grants are not a step toward state-federal partnerships to meet human
needs but a step toward abondonment of federal responsibility.
There is a growing discussion over the ability of states to take on the
administrative responsibilities for these services, given the lack of time for
planning and start-up. Some fear that much of the block grants could be eaten up
in new and duplicative administrative structures.
There is also strong concern about the lack of information about the Admini-
stration's proposals and their consequences. Several of the block grants have not
even been introduced. Very few hearings have been held. Little is known about
what these proposals could really mean. While the consequences of these plans are
unkown, it is impossible for Congress to responsibly chose to implement them.
Thorough and comprehensive hearings and consideration are needed before decisions
are macie.
JCarr:rlc
4/4/81
all to
copy Bob carleson morton Blackwell
gis
orig BALEC to
GOVERNMENT 1611 North Kent St. - Suite 508
INFORMATION
Arlington, Va.
22209
Spring, 1982
SERVICES
(703) 528-1082
BLOCK GRANTS ARE A STARK REALITY.
Eight block grants are currently in
existence, and President Reagan has
proposed seven more. As a federally funded program administrator, you must
face the fact that this is the funding wave of the future.
To help you get a handle on these new developments, we are publishing
NEW DIRECTIONS IN FUNDING
a bi-weekly newsletter and flash reporting service that focuses on
BLOCK GRANTS and the Reagan "NEW FEDERALISM" proposals.
Starting May 15th, each issue will keep you up-to-date on all key fund-
ing issues as they happen as well as provide you with in-depth analyses
to understand the "big picture" in this new era of federal funding.
You'll learn about
BLOCK GRANT LEGISLATION & REGULATION- what you must know
to successfully negotiate the complex new funding process
on Capitol Hill, in federal agencies, and at state offices
WHERE THE MONEY IS GOING---and how to be in the most
advantageous position to get available $$$
NEW FEDERALISM-- how can you benefit from the Medicaid/
Welfare swap and turnback proposals
PLUS, details on participation plans, audit requirements,
state assurance reports, technical assistance and other
insider techniques for more effective grant administration.
Take a look at the sample issue of NEW DIRECTIONS IN FUNDING enclosed.
See for yourself the types of articles, topics, and coverage you'll receive
in the months to come.
(over)
That's why Government Information Services, publisher of Local Government
Funding Report, Shared Revenues Report, and the annual Federal Funding
Guide has chosen to introduce NEW DIRECTIONS IN FUNDING now.
And if you act now, you'll save $35 off the regular subscription price.
That's right, you'll be a Charter Subscriber and receive this valuable federal
grant information for only $93.00 instead of $128.00.
This price is low, considering that one issue, one story, one bit of
timely information, could make the difference in surviving the uncertain
funding future.
But you must act quickly. This Charter Subscription offer expires on
June 15, 1982. Complete the enclosed Charter Subscription order card and
send it in today.
Sincerely,
James J. Marshall
Publisher
P.S.: Worried about whether or not we live up to your high
expectations? Don't. We guarantee your satisfaction
with every. issue of NEW DIRECTIONS IN FUNDING and we
back this guarantee with this promise: If you ever
conclude that NEW DIRECTIONS IN FUNDING is not for
you not doing the job you need done tell us
about it and we'll refund every penny of the unused
portion of your subscription payment. We're that
confident that this rew news service is for you.
So act now. The order card has full details.
NEW DIRECTIONS
in FUNDING
An Exclusive Report on Block Grants and New Federalism
prototype issue
Mixed Bag for Block Grants in FY 1983
President Reagan's fiscal 1983 budget request for the block
consolidated 1982 levels of MCH and WIC. In its annual analysis
grants created in the Omnibus Budget Reconciliation Act of 1981
of the presidential budget request, the U.S. Conference of
shows an increase in two grants, decreases in two others, and
Mayors noted that "as this block grant requires a 75 percent
steady funding in the remainihi three non-education grants.
state match, states will need to contribute $470 million in new
money to receive the full authorized amount."
Maternal and Child Health (MCH), for example, has a $347.5
million budget in fiscal 1982. In the fiscal 1983 request, it is
This, however, is contingent upon the adoption of the Reagan
scheduled to increase nearly three-fold to a $1 billion level.
proposal by Congress, which at this point in time is taking care
Accounting for this jump, however, is an administration plan to
not to accept at face-value, any of the administration's requests.
incorporate the supplemental food program for Women, Infants
and Children (WIC) into the existing grant. In fiscal 1982, WIS
The other block grant showing an increase in its funding level
in fiscal 1983 is the Primary Care grant. In addition to the
is funded at $934 million. Under the fiscal 1983 budget request
for the new block grant that would be created, the $1 billion
administration proposal to expand the grant from covering only
funding level would be more than $280 million less than the
(Continued on page 6)
Alternative to "New Federalism" Unveiled in Senate
Amid reports that President Reagan is considering various
As outlined by Durenberger in a report to the White House,
compromises in his "New Federalism" plan in order to appease
the special fund" would be separate from the $28 billion "New
disgruntled state and local leaders, an alternative plan has
Federalism Trust Fund' being considered by the administration.
surfaced in the Senate that would establish a "special revenue
That fund is slated to begin in fiscal 1984 to finance "super"
sharing fund" to phase in any cuts made to fiscal 1983 budgets
revenue sharing, or at the states' option, continued participation
included in the yet-to-be submitted administration federalism
in the grant programs contained in the 43 areas scheduled to be
plan.
phased out. Funding for the administration fund would come in
part from the windfall profits tax ($16.7 billion), and existing
Senate Intergovernmental Relations Subcommittee Chairman
federal excise taxes on gas, alcohol, tobacco, and telephone
Dave Durenberger (R-Minn.) unveiled his proposal at a recent
services ($11.3 billion).
(Continued on page 8)
subcommittee hearing looking into the administration plan.
Inside
What's What in Block Grants
PP 2-5
Reagan Stumps for New Federalism
p 6
Congress Skeptical of Federalism Plan
p 6
Q & A on New Block Grant Proposals
pp 7-8
GAO Says Stronger Audit Procedures Needed
P 9
Education Block Grant Regs Are Issued
p 9
Community Leaders Question HHS Block Grant Regs
P 10
Governors Issue Report on Federalism
p 11
Seven New Block Grants Proposed
P 12
Viewpoint: HHS and the Regulations
p 12
What's What in the Block Grants Under Existing Law
A "substantial portion of all funds, federal and state," should
LIHEA
be used for maternal/child health services. Special considera-
Low Income Home
tion should go to special projects previously funded under Title
Energy Assistance
V. A "reasonable proportion" of funds should be used by states
($ in millions)
to: reduce infant mortality, preventable diseases, and
1981
1982
handicapped conditions; and, increase maternal care, child
1983
immunizations, and assessments of services to low-income
Program
Appropriation
Request
children.
Low-income home energy
assistance
$1,850
$1,998*
$1,300
PHS
Preventive Health
*Includes $123 million supplemental approved in February.
Services
Authorizations: $1.875 billion each in FY 82-84.
($ in millions)
1981
1982
1983
Current Restrictions: No more than 15 percent of a state's grant
Program
Appropriation
Request
may go for low-income weatherization or other energy-related
home repair. States must conduct outreach activities to assure
Home health
$4
households are made aware of the program. Fair administrative
Urban rat control
13
hearings must be provided to individuals denied assistance.
Fluoridation
7
Health education/risk reduction
14
Emergency medical services
30
$81.6
$81.6
MCH
Health incentive grants
36
Maternal and
Rape crisis centers*
Child Health
Hypertension
20
($ in millions)
1981
1982
1983
*new program
Program
Appropriation
Request
Authorizations: $95 million in FY 82, $96.5 million in FY 83,
Title V maternal/child health/
$98.5 million in FY 84.
crippled children's services
$387
SSI disabled children's services
30
Current Restrictions: At least $3 million must be used for rape
crisis centers. In FY 82, states must also spend funds equalling
Lead-based paint poisoning
10
Sudden infant death syndrome
3
$347.5
$1,000
75 percent of the amount received from Washington in FY 81 for
Hemophilia treatment centers
3
hypertension, followed by drops to 70 percent in FY 83, and 60
Genetic diseases
13
percent in FY 84. Up to seven percent of a state allocation may be
Adolescent pregnancy programs
10
transferred to another health block grant. Administrative
expenses are capped at 10 percent.
Authorizations: $373 million in FY 82 and beyond.
CSBG
Current Restrictions: 15 percent set-aside in FY 82 and from
Community Services
10-15 percent in FY 83 and beyond for discretionary spending for
Block Grant
special projects of regional or national significance, research and
($ in millions)
training, genetic disease testing, counseling and information,
1981
1982
and comprehensive hemophilia diagnostic and treatment
1983
centers. Special consideration will be given to existing genetic
Program
Appropriation
Request
disease and hemophilia programs.
All Community Services Admin-
States must spend $3 for each $4 received in block grant funds.
istration programs except
$545
$348
$100
Although no pass-through requirement exists, conferees
community economic develop-
intended that states "maximize the amount of funding available
ment corporations.
for direct delivery of services, and that local health departments
and other local public health entities receive at least the same
Authorizations: $389.3 million in FY 82 and the succeeding four
proportion of funding in future years
fiscal years.
(Continued on page 6)
Published by Government Information Services, 1611 North Kent St. Suite 508, Arlington, Va. 22209. Telephone (703) 528-1082. James J. Marshall, Publisher;
Donald B. Hoffman Jr., Editor; Diana Izquierdo Gregg, Jan Balkin, John Kotler, Cecily Roberts, Contributing Editors: Rakesh Bhatia, Circulation; Patricia L.
Abbott, Marketing: G.L. Bhatia, Katherine Archer, Production. Subscription $128 per year. © Government Information Services, 1982. Reproduction without
'Reports' to Examine Specific Requirements
In future Issues of New Directions in Funding Special Reports we will examine, in
depth, compliance areas that state and local block grant fund recipients will need to know
to remain eligible for block grants In future years.
Specifically, we will look at:
requirements in force during the fiscal 1982 transition period from federal to state
supervision of funds.
application procedures, bringing together not only those requirements contained in
the regulations, but also those in the often-referred to statute.
public hearing requirements within states; what the localities are required to do, and
more important, the requirements on state legislatures?
the final regulations on existing block grants, as well as future block grants as they
are developed.
special block grant provisions for Indian tribes within states, and what is expected of
the state and tribe in order to assure compliance with both the statute and regulations.
prohibited uses of block grant funds, detalling programs and other uses that are
specifically inellgible for block grant funds.
civil rights under the block grants. Are the same requirements now in place for many
of the federal grant-in-aid programs also in effect for block grant funds; and what to do if
you think you are a victim of discrimination.
some of the block grant organizations that have sprung up throughout the country to
aid state and local governments in the acceptance and use of block grant funds.
who is administering the programs from the federal level as well as the state level, the
problems they see with the block grants and what they are planning to do to correct these
problems.
A-95 and its place within the new block grant system. Are the requirements still
viable under a less structured grant-in-aid atmosphere such as the block grants present,
or will A-95 be a thing of the past?
audit requirements for the block grants and how to prepare for conducting the audit
so as to meet the regulatory and statutory requirements.
SPECIAL REPORTS
Audits and Auditors: Things You Should Know
Regulations currently in force for the new block grants require recipient state governments to conduct financial and
compliance audits for funds they use. Not only do the regulations have requirements for the block grants in general, but
each of the specific block grants have certain requirements that must be met.
Preparation
In preparing to meet the audit requirements, state block grant fund recipients should refer to the Omnibus Budget
Reconciliation Act of 1981 which created the grants. The complete statute is found in the July 29, 1981 issue of the
Congressional Record. Specifically, the general requirements for state audits can be found on page H 5557.
These requirements state in part that financial and compliance audits must be conducted once in every two year
period beginning in fiscal 1982 which started on October 1, 1981. The audit must be conducted according to the U.S.
General Accounting Office standards. Additionally, the statute allows that the audit may be conducted in lieu of any
other financial and compliance audit of the same funds unless specifically required by a particular block grant.
In the Preventive Health block grant, for example, the audit requirement is for every year, not one in every two.
Further more, audits of the preventive health block grant funds must be made by an independent auditor who is not
employed by an agency receiving funds from the block grant.
Another requirement of the grant's audit procedure calls for the audit to be sent to the Department of Health and
Human Services (HHS) within 30 days of completion. The same time frame is in effect for making the results of the audit
available to the public.
Additional Requirements
Such is also the case for audits under the Alcohol, Drug Abuse and Mental Health block grant, where audits are also
required every year, despite the general provisions allowing for audits once every two years.
In the Social Services block grant, the audits are required only once in every two year period, and must also follow the
basic GAO guidelines. One difference noted specifically in the statute for this grant is the requirement that within 30
days of completing the audit, not only must it be submitted to HHS, it must also be sent to the state legislature as well
as the general public.
Under the Primary Care block grant, however, there is an entirely different set of requirements. Not only must the
block grants be audited annually following GAO standards and submitted to HHS and the general public within 30 days
of completion, the individual grants to community health centers must also be audited.
Annually, the statute requires, community health centers must be audited to evaluate the recipient's cost accounting,
financial and program reporting procedures, and billing and collection procedures. As for the billing and collection
procedures audit, the statute requires that these procedures be checked to assure that the fee schedule and schedule of
discounts are relative to the availability of health insurance and other public programs to pay for the provided services.
Selecting an Auditor
These requirements point to the need for some general knowledge in selecting a competent auditor, and the need for
the audit being conducted to be done correctly.
Selecting an auditor should be handled in the same way you would purchase goods or services. In fact, when an audit
firm is chosen, the government is buying a service with public funds, and it should be sure it is getting the best product
available at the best price.
No responsible recipient would purchase a police cruiser, for example, without knowing the type of car that was
needed maximum speed, acceleration, optional equipment required, or delivery schedule. Buying an audit is a
Future Issues Cover Wide Range of Topics
WA
RRA
ET
Welfare Administration
Rental Rehabilitation
Employment and
Assistance
Training
In coming issues of New Directions in Funding, we will look at
What is the story with revenue turnbacks? How are state and
wide swath of areas dealing with both block grants and
local governments planning for the eventual elimination of the
President Reagan's "New Federalism."
federal "fund" to aid in the transition from federal to state and
local supervision?
Aside from general news and budget items, some of the
stories being looked into at this very minute include:
Questions and Answers on the most frequently asked block
grant questions, as well as in-depth analysis on some of the more
How is the "New Federalism" plan being accepted by state
technical aspects of various requirements. In addition, as the
and local leaders? Opposition from the start has been strong, and
"New Federalism" program progresses, we will address
the administration is now having to compromise with these
specifics about the plan, and provide authoritative answers to the
officials in order to gain the support its plan will need. We will
questions nagging at state and local officials.
keep on top of all the latest developments, and how they relate to
How are localities dealing with the block grants?We will look
your state, and community.
at how specific counties and small communities are handling the
Where are states planning state-wide competitions for the
block grant funds, focusing on special programs or procedures
followed to obtain the most of the state grant that is possible.
available block grant funds; what are the deadlines, require-
ments, and filing procedures?
How localities are responding to the block grants. Are they
making ends meet without the federal funds they had in previous
Who is responsible for assurance reports required under the
years? How are they doing it? What are they doing to reduce
block grant legislation? Specifically, how much input will
spending?
communities have in preparing this report which will be used by
HHS in determining future state participation in the block grant
In what way has the easing of federal audit requirements for
program.
block grants alleviated financial and/or administrative burdens
Will additional guidelines or regulations be Issued at the
on your state?
state level for sub-state recipients of block grant funds? Some
states have already indicated they will be establishing such
What state legislatures are doing concerning the
"guidelines." We will take a close look at these, along with
appropriation, allocation or administration of block grant funds.
keeping you informed of any others that develop as the block
grants come more into use.
What states have done to revise the authority and flexibility
of local governments under block grants.
State participation plans and how local officials are getting
involved in developing the use reports for block grant funds.
The complaint procedure, and how local governments and
Specifically, we will look at the comment time, location, and
organizations can file a complaint with HHS concerning the use
public comment requirements within each state.
(or abuse) of state block grant funds. We will look at the
complaints that can be filed, the hearing, and appeal
What states are funding under the block grants that were
procedures.
not, or could not be funded under the previously categorical
programs? We will report on the contents of state application
Future block grants - President Reagan has proposed
plans, where they are filed, and what innovative items they
seven new block grants, and changes to several existing ones.
contain.
We will follow these as they make their way through Congress,
and the funding battles that are sure to develop.
SRS
CDBG
CW
State Rehabilitation
Community Development
Child Welfare
Services
Block Grant
83 Budget Adds Seven Block Grants, Changes Three
Following overwhelming success in creating eight new block
Child Welfare Services: combines child welfare services,
grants for FY 1982, President Reagan has proposed seven
foster care, adoption assistance, and child welfare training,
additional block grants for FY 83. Also on the agenda are
funded in FY 82 at $465 million, into one $380 million state grant
changes to three of the existing block grants.
in FY 83.
New Block Grants
Welfare Administration: combines administration of AFDC,
food stamps and Medicaid with a $2.2 billion FY 83 ceiling for
Vocational/Adult Education combines eight grant programs
state and local administrative costs - about five percent of the
funded in FY 82 at $740 million into one FY 83 grant of $500
federal share of administration costs in FY 82.
million.
Rental Rehabilitation Assistance: replaces HUD's Section
Handicapped Education: preschool incentive grants, Part B
312 rehabilitation loans and Section 8 moderate rehabilitation
state grants, Chapter 1 handicapped program, and certain
with a $150 million, 50 percent matching grant to states in FY 83.
discretionary project grants funded as categoricals in FY 82 at
$896 million, are combined at $846 million in one FY 83 grant.
Changes
Employment and Training: replaces eight CETA programs
Changes proposed in existing block grants by the Reagan FY
funded in FY 82 at $2.4 billion with a single $1.8 billion state
83 budget would:
grant in FY 83.
add Black Lung clinics, migrant health and funily planning,
State Rehabilitation Services: combines state handicapped
funded in FY 82 at $165 million, to the primary care block grant
rehabilitation grants into one $663 million grant in FY 83, while
at a $417 million FY 83 level.
transferring the program from the Education Department to
Health and Human Services.
add USDA's $934 million supplemental food program for
women, infants and children (WIC) to the maternal and child
(Continued on page 8)
Viewpoint: HHS and the Regulations
Well into its second year, the administration has begun an
Still, President Reagan moved forward developing eight new
erosion of the once strong and well-financed grant-in-aid
block grants in his first year in office. Seven of these started on
programs, leaving state and local officials with nowhere to turn
October 1; only primary care is delayed until October 1, 1982.
but their own taxing authority or private corporations for needed
funds. With federal aid for programs managed by private
At that time, the Department of Health and Human Services,
nonprofit groups at a literal standstill, these organizations as
overseer of six of the effective block grants, issued "interim final
well are competing for a part of the available private sector
regulations." The Department of Education took even longer. Its
funds.
block grant regulations were issued on February 12, and then
only as a "notice of proposed rulemaking." Even with this initial
To ease this erosion and increased competition, President
guidance for participants in the block grant programs, questions
Reagan has set up state block grants that theoretically fund the
remain not only at state and local levels, but apparently in the
once-categorical programs at comparable levels without federal
upper-level offices of federal bureaucrats; questions not only of
intervention. At first glance, states were pleased. Another "no
general interest, but on specific requirements.
strings attached" general revenue sharing program.
At HHS, top agency officials required more than four weeks to
The block grants, however, included a 25 percent reduction in
comment on final regulations replacing the October 1 "interim"
funding from fiscal 1981 levels for what the administration
rules; a time lag described by some within HHS as "surprising."
claimed would be lower administrative costs. When the effect
Afterall, the HHS General Counsel's office spent nearly three
this reduction would have on overall funding for the block grants
months revising the regulations. claiming all along that few, if
sank in, states weren't quite so pleased.
any, changes would evolve. Yet, the snail's pace persists.
Local governments, on the other hand, always opposed
When general revenue sharing began in 1972, similar
turning funds for local programs over to states for subsequent
"interim" rules were issued, although they contained more
pass-through claiming the 25 percent cuts were too severe, and
specifics than do those from HHS. In time, however, the Office of
that state administrative expenses would surely eat away further
Revenue Sharing revised and expanded its rules to accommodate
at the diminished funds. Others went one step further saying
specific questions from its principle beneficiaries. Does HHS
that relations between states and local governments had never
think these same beneficiaries will not demand the same kinds of
been the greatest and would surely deteriorate more if block
specifics under these block grants, allowing only a basic
grants were imposed.
framework to guide the distribution of the billions of ddlars
involved?
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The Backgrounder
Herîtage Foundation
No.
The Heritage Foundation
513 C Street
N.E.
Washington, D.C.
20002
(202) 546-4400
228
A New Federalism Task Force Report
November 24, 1982
WHY BLOCK GRANTS WORK
INTRODUCTION
The New Federalism initiative is one of the Reagan Admini-
stration's most promising attempts to reduce the size and role of
the federal government and to return the responsibility for basic
social programs to the states. Recent signs that the White House
is retreating from its original proposals have appeared, ironical-
ly, just as evidence emerging from the 1981 block grant experience
reveals the states to be sophisticated and efficient when given
discretion over such programs.
Statements made during the summer indicate that top White
House officials in the Office of Intergovernmental Affairs have
all but agreed to the position of the National Governors Associa-
tion that the only acceptable part of the New Federalism initiative
outlined in the 1982 State of the Union address would be the
nationalization of the $30 billion Medicaid program. The Admini-
stration has withdrawn from its original plan (opposed by the
governors) to turn over the $9 billion Food Stamp program to the
states, and has dropped part of its plan to streamline mainten-
ance of effort standards, mandatory pass-through requirements,
and other rules that increase costs and restrict experimentation.
Yet the experience of the 1981 block grants suggests that
the states are capable of assuming administrative and financial
responsibilities for even more programs. The data show that the
states can absorb the cuts in federal aid associated with the
blocks and make appropriate cost savings without unduly reducing
services or increasing taxes. The evidence also shows, however,
the need for greater flexibility to enable states to experiment
further and better use their block grant funds.
It is important to the New Federalism debate that the ex-
perience of the 1981 block grants be understood and its lessons
Note: Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an
attempt to aid or hinder the passage of any bill before Congress.
2
properly drawn. Failure to appreciate this experience has promp-
ted many legislators and, apparently, Administration officials to
press less vigorously than they should for the decentralization
of basic support programs that is a key element of New Federalism.
BACKGROUND
Federal grants-in-aid to the states have been growing rapid-
ly. Since 1961, the number of categorical aid programs slated
for states has trebled, reaching 510 in FY 1981.1 Federal spend-
ing for those programs amounted to $94.4 billion in FY 1981, up
$3 billion from 1980 and $12 billion from 1979.2 The average
annual growth rate for those programs over the twenty-year period
was 13 percent, or roughly three times the growth in Gross National
Product. Categorical grants-in-aid to the states constituted 3.4
percent of the 1981 GNP, compared to 1.4 percent of the 1961
GNP.³
The Advantages of Block Grants
The rapid growth in federal aid was seen by many as a wel-
come indication of a national commitment to resolve supposed
national problems and to offer states needed monies to finance
basic service programs. However, such growth brought with it
increased federal influence over state and local policies. The
typical grant featured 300 to 500 separate spending requirements
on state governments.⁴ White House officials estimate that
regulations attached to just one of the nutrition programs involved
62 million "burden hours" of paperwork annually.⁵ Those millions
of man-hours spent on paperwork did more than siphon resources
that could have been directed to actual service delivery. They
also were a clear signal that federal authorities intended to use
the spigot of public monies to change the course of state and
local policies.
This "mandate millstone," as New York City Mayor Ed Koch
described the hundreds of thousands of changes states must make
routinely in their own programs to accommodate federal direc-
tives, is a major problem to states in securing block grants.
The millstone burdened each of the 500-plus categorical aid
1
A cogent history of categorical grants is given in Thomas Ascik, "Block
Grants and Federalism: Decentralizing Decisions," Heritage Foundation
Backgrounder #144, June 5, 1981, pp. 18-23.
2
See Reagan and the States (Washington, D.C.: American Legislative Exchange
Council, 1981), p. 4.
3
Additional statistics about categorical grants-in-aid are provided in
"Fact Sheet: Federalism Initiative," distributed by the White House,
Office of the Press Secretary, January 27, 1982, pp. 2-4.
4
Ibid., p. 3.
5
Ibid., p. 4.
3
programs for the states. In some cases, mandates were reinforced
with sanctions imposed by federal authorities to force states to
comply.
The regulations and spending mandates that accompanied the
Elementary and Secondary Education Act (ESEA) are but one example
of federal influence. Federal spending in 1981 amounted to only 8
percent of all monies spent on education. Yet this had a dispro-
portionate impact on states and localities because it financed
almost 100 percent of student loan, nutrition, and specially
targeted aid programs. To qualify for this 8 percent, the states
(which bore 88 percent of all education costs) were required to
prove compliance with a variety of curriculum, hiring, and admis-
sion standards. These forced states to start new programs or
revise existing ones without regard to efficiency or local desires.
Among the most controversial of the requirements are bilingual
education and school busing.
The Critics of Block Grants
Criticism of block grants has mounted on several fronts. It
is argued, for instance, that the states' own sources of revenue
are so strained they cannot afford to bear the cuts in federal
outlays that are a part of the block grant strategy.
A May 14, 1981, letter to all Members of Congress signed by
63 public interest groups maintained that: "These [block grant]
proposals will certainly mean two things: less assistance to
those in genuine need in these areas and a brutal political
struggle at the state level where the most vulnerable and those
without clout are certain losers. 116
These critics presume that reductions in block grant monies
would prove insurmountable obstacles to the states. The assumption
was that costs would not be balanced by reduced overhead and
compliance costs. This ignores the proved capability of state
governments to make significant changes in priorities and coverage
within a relatively short period.
Critics also maintain that the states would be unwilling and
uncaring administrators of services. This implies that only the
federal government is capable of compassion. Dozens of welfare
and civil rights groups complained that states would use block
6
"Coalition Condemns Plan for Block Grants to States," Washington Post,
May 21, 1981. A June 24, 1981, memorandum written by Susan Phillips of
The Conservative Caucus demonstrates that many of the 63 groups were
recipients of large amounts of federal grants. Mrs. Phillips documents,
among other facts, that some of the groups are actually affiliates or
projects of groups mentioned elsewhere on the list. Other groups had no
phone numbers, were unaware that they were on the list of 63 groups, or
were projects that existed solely through a federal grant.
4
grants as an opportunity to gut basic benefits and service delivery
for the needy. 7 Carl Rowan, in a column entitled "Help for Needy
Retreats to Block Grants Shelter," wrote: "In hundreds of [econom-
ic] areas of life, state and local officials were unable to meet
the needs of families that couldn't pay fuel bills or dental
bills, or bills of other vital needs. In some cases--food programs,
for example--troglodyte local officials even rejected what they
could have for free from Uncle Sam.
Key lobby groups, such as the U.S. Conference of Mayors and
the National Conference of State Legislatures (NCSL), oppose
wholesale distribution of discretionary power to states--not
because states are inexperienced or incompetent overseers of
programs but rather because they see the states as stingy in
distributing monies to the cities and counties.
Concern over the capabilities and dedication of state govern-
ments ignores the impressive political maturation of state legis-
latures during the last ten to fifteen years. Between 1974 and
1980, the number of legislative committees and support staff
doubled. Professor Alan Rosenthal of Rutgers University con-
cludes:
State Legislatures have recently undergone significant
change
Legislatures are more likely to meet annual-
ly than biennially. They spend more time in session
than before. Professional staff has increased. Re-
search agencies nearly everywhere are larger, many more
important standing committees have assistance and
leaders in more than half the states have full-time
staff support. 119
In fact, it has been these improved resources that have enabled
the states to establish such a commendable record on assuming
responsibility for the block grants.
THE 1981 BLOCK GRANTS
The nine block grants, passed by Congress as part of the
1981 Omnibus Reconciliation Act, contain the following principal
provisions:
Maternal and Child Health Services. Seven categorical
grants are consolidated--Maternal and Child Health, Supplementary
7
For specific comments by those groups, see "Block Grant Proposal Carries
Few Strings," Washington Star, March 7, 1981.
8
Washington Star, May 31, 1981.
9
Dr. Alan Rosenthal, Legislative Performance in the States (New York: The
Free Press, 1974), PP. 2-3.
5
Security Income [Children], Hemophilia, Sudden Infant Death
Syndrome, Lead-Based Poisoning Prevention, Genetic Diseases, and
Adolescent Pregnancy. The consolidation is designed to enable
states to improve the health of mothers and children and support
special research, training, and service programs. This block
grant is funded at $373 million for FY 1982.
Preventive Health and Health Services. This program consoli-
dates eight categorical grants, including Home Health Incentive
Grants, Fluoridation, Rat Control, Health Education/Risk Reduction,
Hypertension, Emergency Medical Services, and Rape Crisis Counsel-
ling. The consolidation is designed to improve the health of
recipients by preventing incidence of unnecessary injury, ill-
ness, or death. This block grant is funded at $95 million for FY
1982.
Alcohol and Drug Abuse and Mental Health Services. This
consolidates five programs--Alcohol Project Grants, Alcohol
Formula Grants, Drug Abuse Project Grants, Drug Abuse Formula
Grants, and Mental Health Services. The consolidation seeks to
improve the health of recipients by providing treatment, preven-
tion, and rehabilitation services. This block grant is funded at
$491 million for FY 1982.
Primary Care. This applies to only one categorical grant,
the Community Health Centers, which is converted into a block
grant by increasing state alternatives for providing primary
health care. It is funded at $302 million for FY 1982.
Social Services. This block redesigns three programs pre-
viously authorized under Title XX of the Social Security Act--
Social Services, Day Care Services, and State and Local Training.
The primary purpose is to prevent or remedy neglect, abuse, or
exploitation of vulnerable children and adults and to prevent
inappropriate institutional care. It is funded at $2.45 billion
for FY 1982.
Low-Income Energy Assistance. Designating the Low-Income
Energy Assistance Program a block grant gives the states more
flexibility in their assistance to eligible households for heat-
ing, cooling, and weatherization costs. Consolidation also
reduces federal requirements for state assistance under the
program. This block is funded at $1.87 billion for FY 1982.
Community Services. The consolidation redesigns programs
previously administered by the Community Services Administration,
including Community Action, Senior Opportunities and Services,
Community Food and Nutrition, Training and Energy Conservation,
Evaluation, and Technical Assistance. Consolidation is designed
to enhance the anti-poverty efforts of federal, state, and local
governments. This block grant is funded at $389 million for FY
1982.
6
State Community Development Block Grant Program for Small
Cities. This consolidation gives states the option of taking
over responsibility for a program previously administered by the
Department of Housing and Urban Development. It seeks to enhance
housing, income, and environmental living conditions for low-
income individuals. The block is funded at $1.08 billion for FY
1982.
Elementary and Secondary Education. This consolidation has
two chapters. The first streamlines programs in Title I of the
Elementary and Secondary Education Act--Basic Grants to Local
Education Agencies, Concentration Grants, Migratory Children,
Handicapped Children, and Neglected and Delinquent Children.
Chapter 2 consolidates 27 other elementary and secondary pro-
grams, such as Basic Skills, PUSH-EXCEL, Metric Education, Con-
sumer Education, Library Resources, Community School Aid, Gifted
and Talented, Ethnic Heritage, Teacher Corps, and Alcohol and
Drug Abuse Education. This block grant is funded at $518 million
for FY 1982.
HOW CONSOLIDATION WORKS
The Reagan Administration's 1981 economic recovery plan
stressed two aims of block grants: (1) to reduce the cost and
number of federal-state categorical programs and (2) to limit the
growth of aid under such programs. 10 To achieve these goals, the
Administration proposed to consolidate almost 100 different
categorical programs into seven blocks--grants that would allow
states to implement the programs free from the need for annual
reports, maintenance of effort standards, state matching funds,
or even the submission of applications for the grants. The
grants would have been funded automatically without the means
tests and application procedures associated with categorical
programs.
The block grants were supposed to involve substantive regula-
tory reform for many categorical grants. This was to result in
less overhead, a greater share of benefits going to the needy,
increased flexibility for state and local officials, and improved
political accountability for the programs. Robert Carleson,
Special Assistant to the President for Policy Development, sum-
marized the block grant rationale:
In conjunction with regulatory reform, block grants are
designed to reverse the trend towards greater federal
control over state and local programs. They represent
a means of ameliorating the impact of federal spending
reductions, which are required in this economic climate.
10
"Consolidating Categorical Programs into Blocks," A Program for Economic
Recovery, 1981, pp. 7-1 and 7-2.
7
Block grants reduce state and local compliance costs,
eliminate waste, reduce federal administrative costs,
and make state and local officials directly accountable
to their constituents. 11
Despite Carleson's assurances, some observers point out that
the consolidations are not true block grants, for they include
the sort of restrictions that characterized the grant consolida-
tions of previous administrations. Many governors, for instance,
have their doubts. Said Governor James Thompson to the Illinois
General Assembly: "We were promised relief from regulations and
mandates. Instead, the states will receive these half-hearted,
watered-down versions of the original proposals. We got the
cuts, but not the flexibility. 112
Earmarks
It is easy to understand why the 1982 grant consolidations
might be considered "categorical" conversions instead of "block"
conversions. In some cases, Congress attached provisions to the
grants that escalated costs beyond what the states might have
authorized otherwise. In other cases, Congress enacted spending
and distribution restrictions that made the states little more
than a conduit for carrying out a federally prescribed course of
action. One example is the "earmark," a term referring to the
percentage of grant funds that must be set aside for a purpose
prescribed by statute.
Earmarks limit the range of spending and management options
of a state. In the Elementary and Secondary Education Block
Grant, for example, 80 percent of the funds available from the
federal government must be "passed-through" automatically to
local education agencies "on the basis of relative enrollment
adjusted for relative numbers of higher cost children." With the
education block, therefore, the states not only must give the lion's
share of their monies to local entities, but also must distribute
the monies in accordance with a formula mandated at the federal
level. The earmarks in the education block are typical of the
1981 blocks. Six of the seven health block grants include such
set-asides.
By reducing the states' ability to assign priorities for
funding topic areas, the earmarks inhibit the states from redesign-
ing previous categorical grants into a system uniquely responsive
to their own needs.
11
The White House, Office of Policy Development, "Summary Fact Sheet: The
Administration's Block Grant Proposals," May 14, 1981.
12
Quoted by Illinois State Representative Penny Pullen in "Guest Editorial,"
in The American Legislative Exchange Council's First Reading, October 1981.
8
Reporting and Audits
The spending mandates are one of the structural constraints
imposed by Congress on block grants. Others require states to
conduct reporting and audits of the block grant programs. Addi-
tionally, the blocks are still subject to federally required
"cross-cutting mandates," even though the very purpose of the
grant consolidations was to relieve the states of onerous tasks
associated with federal rules. Cross-cutting mandates oblige the
states to adhere to a wide variety of federal statutes of which
they may not be aware. Those include affirmative action quotas,
access to handicapped rules, Davis-Bacon construction wage require-
ments, and the Uniform Relocation Assistance Act. The latter
raises potential financial problems for the states in that it
requires governmental units to compensate individuals who are
displaced because of a government project.
The GAO Findings
The block grant pitfalls left open by Congress were recently
highlighted in an August 24 Report to the Congress by the U.S.
General Accounting Office (GAO). The 57-page report noted the
same earmarks and reporting requirements outlined above. The GAO
added the observation that mandatory pass-through provisos and
the slow rate of federal-state money disbursements complicated
state planning efforts. In some states, according to the GAO,
federal requirements forced the states to "sharply increase
expenditures" in some of the blocks. 13
In general, however, the GAO gave high marks to the states
for overcoming initial obstacles to block grant efficiencies.
One of the most important factors that favored the states at the
outset was their working familiarity with block grant recipients.
The report cited Colorado, Kentucky, Washington and Michigan as
prime examples of states continuing to use previously funded
grantees as service delivery systems. "Because of states' prior
experience, relatively few organizational adjustments were needed,"
stated the GAO report. The GAO added: "In addition to employing
existing organizational structures, states drew upon their insti-
tutional knowledge for carrying out block grant responsibilities.
For most block grants, details on how the previous programs were
run, their purposes, and the activities required were well known.
Moreover, states often had existing relationships with service
providers. #14
The GAO report is useful to the extent that it reaffirms the
states' abilities to be creative under pressure. However the
report raises some unanswered questions that will be dealt with
13
Report to the Congress by the Comptroller General, "Early Observations On
Block Grant Implementation," U.S. General Accounting Office, Report
#GGD-82-79, August 24, 1982, p. 25.
14
Ibid., p. 12.
9
elsewhere in this Backgrounder. The report declares that states
made few organizational changes during the categorical-block
grant transition, but does not identify savings that states made
in the process. The report mentions that private contractors
from the categorical system were retained under the blocks, but
does not examine how previously covered recipients are affected.
It notes that state legislatures are becoming more active in
oversight and implementation of the blocks, but does not analyze
how their increased role affected eligibility criteria. The
report identifies institutional obstacles that impede program
efficiency, but does not suggest ways to improve the block grant
structure in a meaningful way. And finally, the report restricts
itself to 13 specific states, without any reference to successes
achieved in the other 37.
Flexibility
The GAO study is correct in stating that the block grant
legislation enacted in 1981 gives the states some important
flexibility. In the Social Services and the Alcohol and Drug
Abuse and Mental Health blocks, Congress repealed a matching fund
requirement which, under the categorical system, obligated the
states to appropriate monies from their own treasuries equal to
the federal outlay. In four new blocks (Low-Income Energy,
Community Services, Preventive Health, and Alcohol and Drug Abuse
and Mental Health), states can transfer funds from one block to
another. In all the blocks, states can decide how to design and
write their applications for funding. Freed from standard forms,
the states will "save" 5.4 million man-hours that would otherwise
have been spent on paperwork, according to Office of Management
and Budget estimates. These reductions in man- hours will reduce
paperwork time by 83 percent. 15
Flexibility is also gained in that the states can now decide
the date of their participation in the block grant program. This
option is an important political concession to the states since
the final form of block grant legislation was not clear until
several months after the states' fiscal year began (for 46 states,
the date is July of each year). States needed time to develop
applications, prepare demographic data, project expected partici-
pation, and itemize probable outlays. Granting discretion to the
states regarding the date of participation gave them the opportu-
nity to phase out efficiently the categorical system and the time
to solicit bids from the private sector for some block grant
functions.
In sum, it is debatable whether the 1981 grant consolidations
represent true block grants. State governments did not have
15
U.S. Office of Management and Budget, "Block Grant Implementation: Effect
of Block Grants on Paperwork Reduction," Attachment #3, September 21,
1981.
10
unbridled discretion regarding financial and administrative
management. On the other hand, the states did have some latitude
regarding contracting out of services, transfer of funding, and
gradual conversion from categorical to block grants. Additional-
ly, the block grant consolidation offered significant reductions
in compliance costs and paperwork burdens.
PROGRESS OF THE BLOCKS: IMPLEMENTATION
Block grant enabling legislation was purposely vague on the
matter of responsibility--in the case of all the blocks except
education, "the state" meant the governor or the legislature. It
was equally silent about process, state compliance with civil
rights guarantees, distribution of benefits, and the procedures
that each state should use to ensure public participation in the
block grant process. The Children's Welfare League, the League
of Women Voters, the Center for Community Change, and other
interest groups expressed serious concern that the public would
be excluded from the block grant process, once those jurisdictional
and technical questions were resolved. 16
Two-thirds of the nation's governors have formed task forces
to review block grant problems; these are mainly advisory bodies
and are not authorized to dictate the nuances of implementation. 17
Similarly, several state legislatures have voted themselves the
authority to apply for or accept block grant applications. Most
states are administering the blocks by using existing personnel.
A handful of states, notably Louisiana and Texas, are using the
federal block grants as an opportunity to merge similar state
programs into a single state office.
Some states have found that block grants are useful for
giving local governments more control over basic benefit pro-
grams. California and Oregon are the two states most actively
decentralizing block grants to the county level--so-called mini-
block grants. California officials have already given counties
complete authority to administer the Social Services Block Grant.
As a result, state officials feel that they can absorb the funding
reductions that accompanied the block grant. Only a minimal
number of state personnel is needed to oversee the counties'
efforts. The counties, meanwhile, are using volunteer services
and private contractors to cut costs. The California innovations
have attracted attention; the Pennsylvania and Illinois General
Assemblies, for example, are now debating the prospect of estab-
lishing mini-block grants for their state-local grant awards.
16
Those concerns are detailed in a lengthy "Briefing Book" about block
grants (Washington, D.C.: Center for Community Change, 1981).
17
James Stockdale, Deputy Undersecretary for Intergovernmental Affairs,
Memorandum to Regional Directors, U.S. Department of Health and Human
Resources, May 24, 1982., p. 23.
11
Critics' fears that the public would be excluded from the
process have proved unfounded. Federal enabling legislation
requires states to conduct an initial public hearing about the
distribution and structure of the blocks. Indeed, states had to
hold such hearings before they could receive the block awards.
The states have complied with this mandate and are making public
hearings a regular, integral part of the block grant process. In
a few states (notably Utah and Virginia), the executive branch of
the state government has established toll-free telephone numbers
through which the public can report problems or successes with
the blocks.
Other states have been equally innovative in tapping public
views of block grants. Efforts range from advertising in news-
papers and on television to holding field hearings in the loca-
tions most likely to benefit from the blocks. At a Nebraska
hearing, approximately 1,500 people turned up.
The block grant program is the first major federal-state
effort that gives the public an opportunity to comment on plans
for major grants-in-aid policies. This alone makes it a critical
element of the New Federalism structure. The states' hearings
constitute the first instance of the public at state and local
levels being brought into the policy planning process. A Febru-
ary 1982 survey by the National Governors Association (NGA) found
that state public hearings on block grants will be even more
widespread in 1983. 18 "If nothing else," concluded the NGA
survey, "the data provided by the states clearly and emphatically
show that citizens were provided a multiplicity of opportunities
to participate in the process
[F]or all the programs (except
Title XX and Social Services Block Grant) this is generally the
first year in which the public has been involved so heavily in
the process of program decisions. ⑉19
PROGRESS OF THE BLOCKS: FINANCIAL MANAGEMENT
Once the states resolved the issues of authority and public
participation, the immediate problem was how to manage the finan-
cing of the block grants. Initially, funding was not technically
a part of the state budgets, since the states' fiscal years had
already started at the time Congress approved funding. When the
blocks were enacted, therefore, the states faced a number of
problems.
1. How to accommodate the budget reductions. The Reagan
Administration originally requested that the blocks be 75 percent
18
The NGA survey also shows that 35 states plan to increase public partici-
pation during FY 1983. "1982 Governors' Guide to Block Grant Implementa-
tion," National Governor's Association (February 1982), p. 21.
19
Ibid.
12
of the FY 1981 funding for the relevant categories. The states
were expected to make up the budget gap through reduced overhead
and compliance costs. The General Services Administration,
however, estimated that administrative costs associated with the
categorical grants amounted to only 5 to 15 percent of total
outlays. Moreover, the economic recession increased normal demand
for services under the grants program--services that, under the
federal enabling legislation, required the states to cover certain
categories of persons.
2. Whether to transfer funds between blocks. The enabling
legislation allowed the states to transfer certain amounts of
grant funds from one block to another. Though states can direct
a small percentage of unused monies to another grant program in
order to compensate for unexpected shortfalls in the blocks, such
a grant diversion might reduce the funds available from the
federal government in future cycles.
3. How to maximize service delivery with a minimum of admini-
strative costs. This issue is particularly poignant for block
grants because of the federally mandated cap on administrative
expenses.
Accommodating the reduction of federal funds did not become
a major problem. The reason: there was almost no cut in federal
outlays to the states. Though all state officials had come to
expect a uniform 25 percent reduction in funding for the blocks,
the final cut, as set by congressional Continuing Resolutions,
amounted to only 10 percent. Even this turned out to be far over
the mark. The National Association of State Budget Officers
estimates that, as of February 1982, the collective outlays for
those programs (at the state level) dropped an average of just
0.5 percent, 20 meaning that the states have not had to cut budgets
or raise taxes to accommodate the anticipated reduction in block
grant funding--it never took place.
States were concerned with the distribution procedure for
the funds. Disbursement is governed by two federal processes,
the Intergovernmental Cooperation Act (ICA) and the Continuing
Resolution of Congress. The first posed a cash-flow problem for
states because it obliges the federal government to give grants
to states only on an actual or immediate need basis. In other
words, the state governments count block grant funds as part of
their state budgets, but the federal government will disburse
funds only on an incremental, quarterly basis. This restricts
the states' abilities to deposit block grant monies for inter-
est-yielding purposes in banks and other lending institutions--a
20
Ibid., p. 37. Individual state changes in federal funding for the blocks
ranged from +2.3 percent to -19.8 percent.
13
common cash management practice. The ICA thus effectively re-
duces the total funds available for services. 21
The federal government's reliance on a Continuing Resolution
to fund programs compounds the cash management restrictions. The
Continuing Resolution usually covers program funding for no more
than a few months. In the case of block grants, the federal
government's use of such stop-gap budgeting prevents the state
governments from receiving funds on a predictable and regular
manner.
The double restrictions of the ICA and the Continuing Resolu-
tion have caused particular problems for blocks subject to un-
usual demand, such as the Low-Income Energy Block Grant, designed
to give aid to needy individuals who cannot pay their high heat-
ing bills. The Low-Income Energy Block Grant naturally incurs
its greatest outlays during the winter months, but ICA guarantees
the release of funds only gradually; financing via the Continuing
Resolution, meanwhile, assured that the funds would be less
predictable. Officials at the Office of Management and Budget
apparently attempt to take into consideration the states' pro-
blems and give a high priority to expediting block grant disburse-
ments. While the ICA required the government to make only quarter-
ly payments, OMB officials try to make funds available in line
with actual program operations.
Although there were fears that Low-Income Energy funds would
be inadequate to meet states' needs, over two dozen states, as of
Spring 1982, had transferred funds, capped at 10 percent by
federal legislation, mainly to augment funding for the Social
Services Block Grant. Five states transferred Low-Income Energy
funds into weatherization programs, 22 and 26 states transferred
funds into Title XX of the Social Services Program. 23 Therefore,
in spite of initial cash-flow problems, the states have found
surplus funds to be redirected into other block grants.
In the short run, the interblock transfer of funds has
enabled states to reassign priorities within the blocks to the
extent allowable under law. The long-run consequences are not as
clear, however, because the transfer of funds out of a block may
signal to future federal administrators that the state was awarded
too much money for that block.
21
The technical procedure by which states receive their funds is explained
in "The Block Grant Award and Cash Disbursement Procedures," a fact
sheet (Office of Management and Budget, October 2, 1981). Additional
details are given in a question-and-answer paper, untitled (Office of
Management and Budget, September 29, 1981).
22
Colorado, Kansas, Maine, North Dakota, Oklahoma.
23
Alabama, Arkansas, California, Florida, Georgia, Iowa, Kansas, Kentucky,
Louisiana, Maryland, Michigan, Missouri, Montana, Nebraska, New Jersey,
New York, North Dakota, Oregon, South Dakota, Utah, Vermont, Virginia,
Washington State, West Virginia, Wisconsin, and Wyoming.
14
PROGRESS OF THE BLOCKS: SERVICE DELIVERY
It is becoming evident that service delivery under the
blocks is better than it was under the previous categorical pro-
grams. The states' successes can be examined in terms of: (a)
the nature of new recipients previously excluded from the cate-
gorical grants and the scope of new services available; (b) the
level of administrative activity and the proportion of block
grant monies consumed by administration.
Scope of Block Grants
In all the blocks, there has been an increase in new, pre-
viously uncovered recipients--a change directly attributable to
the reassignment of priorities within the blocks. In Montana,
for example, one portion of the Maternal Child Health Block Grant
was merged with the Handicapped Children's program. Montana's
consolidation increased the projected participation in the pro-
gram by about 11 percent. Similarly, Louisiana is regrouping all
state community service programs into the same State Department
of Labor division that will handle the Community Services Block
Grant. New York State officials are merging the Social Services
Block Grant and Alcohol and Drug Abuse and Mental Health Block
Grant into an existing "Consolidated Services Planning Process."
Thirty state governors have established a lead agency responsible
for coordinating the blocks with state programs. Thirty-two
state governors have created task forces whose mandates include
the identification of existing federal or state rules that pre-
vent augmentation of the blocks.
This consolidation by the states runs counter to the predic-
tions of critics who believed that states would use block grants
to cut aid to needy individuals. In fact, the consolidation has
improved service to the needy since the programs are now designed
to give priority to categorically needy persons.
The majority of states have drafted comprehensive lists of
"risk factors" to serve as a precondition for distribution of
block grant benefits. In the case of the Preventive Health Block
Grant, states are giving priority to areas with either high rates
of communicable diseases or areas with high propensity for health
related problems (e.g., high crime areas where rape prevention pro-
grams may be useful). Similarly, some states are using the Community
Services Block Grant to contract with private providers willing
to address the needs of unserved populations. Under the Communi-
ty Services Grant, there is a trend for new services to be provided
for previously unserved groups via competitive bidding for con-
tracts. Delaware and Arkansas have been especially active in the
competitive bidding/contracting-out process.
Are the consolidations and redesigning by states adversely
affecting previous recipients? Until the states complete their
audits of the blocks, no definitive answer is possible. Thus
far, however, the states seem to be taking steps to offset seri-
15
ous shortfalls in projected aid. In the case of the Maternal and
Child Health Services Grant, the use of supplemental appropria-
tions by the states is especially noticeable. Forty-five states
are offering the basic matching fund required by federal law ($3
in state funds for every $4 in federal funds); 24 19 states are
matching federal funds in excess of the match prescribed by
federal law; 25 and 19 states are requiring some sub-unit of state
government to provide an additional match of federal monies. 26
As of June 1982, approximately two-thirds of the states had
not made changes in eligibility requirements for either individ-
uals or grantees. The remainder of the states are considering
changes in eligibility, but those changes, if enacted by the
state general assemblies, will only affect recipients of the FY
1983 block grants. This preservation of eligibility requirements
means that the blocks are still servicing the same broad groups
of beneficiaries. What has tended to change is the priority
under which the recipients are given benefits.
The states also have adequate safeguards to assure compli-
ance with nondiscrimination provisions of the federal block grant
laws. As of July 1982, no state had been sued or charged in a
similar civil action that alleged discriminatory practices vis-a-
vis block grants. Given the high degree of public and inter-
governmental interaction on the block grant program, there are
adequate checks to detect violations of civil liberties.
Economies in Administration
One group only has suffered from the institution of block
grants: the state bureaucrats who usually audit, survey, monitor,
or otherwise certify the progress of categorical grants.
Federal legislation still ensures a full public accounting
of the blocks. Each state is required to provide federal agen-
cies with an annual independent audit. Still, the paperwork
burden formerly imposed on states through categorical grant
regulations is noticeably absent. It is still too early to
assess the impact of reduced paperwork on individual states.
State budget officers, however, believe that the paperwork costs
will be much lower than those under the categoricals--if for no
other reason than that the latter required several reports for 57
different programs. In contrast, the new block grants require
24
The five exceptions are: Iowa, Nebraska, New York, Oregon, and West
Virginia.
25
Alaska, Arizona, Arkansas, Georgia, Idaho, Illinois, Louisiana, Maine,
Maryland, Michigan, Mississippi, Missouri, Nevada, New Hampshire, North
Carolina, Ohio, Rhode Island, Tennessee, and Wyoming.
26
Alabama, Connecticut, Delaware, Georgia, Illinois, Indiana, Kansas,
Minnesota, Montana, Nebraska, New Jersey, North Carolina, North Dakota,
Oklahoma, Pennsylvania, Rhode Island, Tennessee, Texas, and Wisconsin.
16
only one or two smaller reports for just seven individual pro-
grams. Accordingly, states expect to spend at least 40 percent
less on conducting audits and compliance reports than in FY 1981.
Preliminary trends suggest that the very modest funding
reductions are not straining state financial resources. Inter-
block transfers (especially for the Social Services block),
supplemental funding (beyond the matching fund requirements of
some blocks), and the projected reduction in compliance and
paperwork costs have all contributed to the solvency of the
blocks. In a handful of states, some innovative administrative
action has further bolstered the self-sufficiency of selected
blocks. Montana's decision to terminate specific projects under
the Maternal and Child Health block and Washington State's action
to impose limited user fees for nonpriority services are but two
instances of cost-saving measures. That the states are making
such decisions demonstrates that a fundamental purpose of the
block grant system has been achieved: states have responsibility
for program operations, to the point that they are now account-
able for the grants.
Increasing Decentralization
The states also have shown that block grants are only a
first step down the ladder of decentralization. For some states
it has prompted the mini-block grant approach that has helped
reduce unneeded overhead while returning responsibility to local
officials. In the interim, the states' decentralizing programs
are demonstrating a sophistication and sensitivity to local needs
that refutes arguments of early critics that the states could not
handle the grants fairly and effectively.
The irony is that states are making strides in spite of
continued federal restrictions. Those restrictions, which have
more to do with congressional action than with Administration
policy, will dampen future state innovation. The restrictions
are unnecessary, redundant, and inconsistent with the blocks'
goal of permitting maximum flexibility for the states. That
states established the mini-block systems on their own initiative
suggests that they do not need the guidance and supervision
inherent in the spending restrictions imposed by Congress.
Unless such restrictions are removed, a future Administration or
Congress may add further burdens. Only by drastically revising
or repealing these restrictions now can decentralization accele-
rate.
NECESSARY REFORMS
Finance
Neither the National Governors' Association report nor the
GAO study offers substantive recommendations about how to improve
the block grant program enacted in 1981. The recommendations
17
that the two reports do make are limited to technical transition
and data collection changes -- hardly the sort of needed reforms
that can bolster the long-range security of the blocks. The
evidence presented above suggests that at least three financial
reforms are needed. First, the federal government should require
immediate disbursement of all available block grant monies to
the states. The theory that the states should only be allotted
funds on an actual and immediate need basis presumes that states
will either overspend or misuse the funds. States have the
financial maturity to handle large public funds deposits. Trans-
mitting available funds to states immediately would reduce the
reliance of the states on federal authorities for permission
regarding the disposition of funds. State governments deserve a
free hand in the management of public funds, if only because they
are the entities responsible and accountable for block grant
operations.
Second, the cash management of public funds should be re-
formed. Currently, states are allowed to use grant awards only
for actual grant outlays, meaning that they cannot deposit block
grant funds in banking institutions for interest-yielding pur-
poses. The problem with this restriction is that unobligated
grant funds (however large or small) should be accumulating
interest while not being used. If the states are allowed to
invest block grant funds on a periodic basis, they have a way to
augment their initial grant award. As such, Washington should
either authorize cash management of monies by states; or, at a
minimum, allow states to receive proceeds from the federal
management of undisbursed but obligated block grant monies.
A third financing reform concerns the day care portion of
the Social Services Block Grant. Currently, almost two dozen
states are implementing some form of Community Work Experience
Program (CWEP), also known as "workfare." These CWEP programs
require recipients of certain public aid programs to "work off"
their benefits by taking positions with public service agencies,
which often include day care centers. Since the CWEP approach is
a goal of the Administration, and since the CWEP option is current-
ly nonbinding on the states, the Social Services block should be
revised to give states an incentive to establish a workfare
program that includes day care options. The incentive for the
state could be financial: States with a certified CWEP program
that includes substantive day care provisions ought to be allowed
to transfer funds from the day care portion of Social Services
into another grant program. This approach would have the advantage
of encouraging the remaining two dozen states to establish full
or partial CWEP programs, while at the same time freeing a sizable
portion of the largest block grant for use elsewhere.
Administration
There are several reforms that can be made in the administ-
ration of block grants. Each would reduce the costs of the block
grant system, introduce competition into the process, and increase
flexibility for the states. The reforms also would increase the
service delivery potential of the blocks.
18
Bring block grant activity under the jurisdiction of OMB A-85
mandates, or else require states to contract-out certain functions
of the grant awards. The contracting-out process can either be
broadly worded to cover all possible activities that are not
inherently governmental in nature; or the procedures can be
restricted to services that are directly "private" in nature,
such as data processing, records keeping, processing of claims,
or warehousing.
Allow states the right to seek discretionary regulatory relief
from the federal government. This option would allow states to
seek a waiver from any federal regulation that is particularly
inappropriate or inapplicable to their geographic area. Relief
could require that federal waivers be printed in the Federal
Register, along with the normal comment period and review cycles.
Allow states to transfer larger portions of funds between
block grants. Currently the Community Services block allows only
a 5 percent transfer, the Low-Income Energy block 7 percent, and
the Alcohol and Drug Abuse and Mental Health block 7 percent.
Expanding the scope of transfer capabilities would not necessarily
diminish block grant service delivery since the evidence shows
sincere efforts by the states to focus block grant benefits on
needy and previously unserved populations. Increasing the inter-
block transfer ability encourages states to find ways to better
manage finances.
Allow states to deliver block grant benefits in the form of
vouchers. The voucher approach, already used in the federal Food
Stamp and G.I. Education program, would encourage block grant
recipients to reduce expenses and would introduce more competi-
tion among vendors of services.
Repeal the matching fund requirements. These requirements
increase block grant costs by forcing specified levels of state
outlays. States can provide useful in-kind services to compen-
sate for reduced matching requirements. Current efforts to
consolidate state programs alongside federal programs and provide
supplemental matching funds by sub-units of government suggest
that states will augment blocks regardless of matching fund
requirements.
All the suggested reforms require some statutory change by
Congress. As yet, no effort has been made by Administration
officials or congressional aides to introduce the reforms required
in these recommendations. In fact, no effort has been made to
reduce the regulatory burdens usually associated with the grants-
in-aid system. If the block grant strategy is to be successful,
then much more reform is needed.
CONCLUSION
In addition to reforms in the present block grants, Congress
and the Administration should press forward with a plan to extend
19
the block grant mechanism to the major social programs, as envi-
sioned in the President's original New Federalism proposal.
Income maintenance, nutrition, health, housing, and economic
development should be examined as candidates for block grants. A
blueprint for the consolidation of certain categorical grants in
these areas has been outlined in publications by The Heritage
Foundation and the American Legislative Exchange Council.²⁷
Consolidating another $50 billion in categorical programs would
not hamper their administration or undermine the eligibility
rights of needy individuals. Indeed, as this study has shown,
the service programs surely would become more responsive to reci-
pients, less expensive and less bureaucratic.
Far from retreating on the initial goal of transferring the
planning and operation of major social programs to the states,
the White House should make the consolidation of programs into
block grants a top priority of New Federalism. While the desir-
ability of funding these basic services at the state level may
still be uncertain, the benefits of administration by the states
are very clear.
Prepared at the request of
The Heritage Foundation
by Edgar Vash
27
Thomas M. Humbert, "Budget Cuts: The Key to Economic Recovery," Heritage
Foundation Backgrounder #151, September 18, 1981; White Paper on New Fed-
eralism: The ALEC Alternative (Washington, D.C.: The American Legis-
lative Exchange Council, 1982).
Edgar Vash is a Washington, D.C.-based consultant on state and local finance.