Block Grants: Flexibility vs. Stability in Social Services

Margy Waller
Margy Waller Visiting Fellow, Economic Studies and Metropolitan Policy, The Brookings Institution

December 1, 2005

In 1996, Congress and President Bill Clinton agreed on fundamental changes to Aid to Families with Dependent Children (AFDC), the safety-net program of cash assistance to poor families, transforming what had been a federal-state funding partnership into the Temporary Assistance for Needy Families (TANF) block grant to states. Turning this entitlement safety-net program into a block grant was not a new idea in 1996. Beginning in the 1940s, numerous administrations, members of Congress, commissions, and scholars recommended block grants of federal funds to lower levels of government. In 1980, Robert B. Carleson, President Ronald Reagan’s senior welfare advisor in the White House, stated his intention to achieve Reagan’s goal of returning responsibility for financing welfare to states by eliminating the guarantee of federal matching funds to assist poor parents and replacing it with a system of state block grants.

Block Grant History

In the late 1970s, the Advisory Commission on Intergovernmental Relations (ACIR) developed a list of characteristics of block grants, saying, “a block grant may be defined as a program by which funds are provided chiefly to general purpose governmental units in accordance with a statutory formula for use in a broad functional area, largely at the recipient’s discretion.” In contrast, categorical funding from the federal government to states and localities is generally limited to narrowly defined purposes and targeted populations, and typically comes with reporting obligations designed to ensure accountability to the federal agency charged with oversight of the program. Proposals to block grant programs that previously guaranteed benefits to individuals who met a set of defined qualifications (called entitlements) present special issues because shifting from the guarantee to fixed funding ends the individual entitlement, as occurred with the welfare legislation in 1996.

Federal categorical funding for a variety of targeted needy groups and communities grew in the 1960s. By the late 1960s, many scholars called for consolidation and devolution of the funding and program oversight to lower levels of government as a means to reduce the complexity and size of the federal government. Some state and local officials began to support a block grant mechanism because they believed it would reduce administrative and reporting burdens.