WHAT DO BLOCK GRANTS AND TAX CUTS HAVE IN COMMON?

by Guest Blogger, 6/29/2003

The Bush Budget for FY 2004 proposes major funding changes, including block grants, for a number of low-income programs like Medicaid and the State Child Health Insurance Program (SCHIP), Section 8 Housing Vouchers, Unemployment Insurance, Head Start, Child Welfare and Job Training. The House has begun considering block granting Head Start and Job Training programs. This means that states would get a block of money, sometimes guaranteed for a fixed number of years, to administer programs with less federal oversight. Low-income families and children will lose any entitlement to a minimum federally set safety net that expands when more people are in need. While the safety net is slowing being eroded, block grants would speed up the process. Also, under TANF reauthorization, we expect the "superwaiver" to be revived again – this provision basically unties federal regulations, allowing state governors to waive federal rules in programs including food stamps, public housing, homelessness programs, childcare, job training and adult education.

While block grants and the superwaiver are being touted as a way of allowing the states the flexibility to use federal funds more effectively the proposals are, in fact, mostly about control of spending. Block grants have been around since 1945, and President Reagan expanded block granting to a number of programs in 1982. Looking back at prior block grants, some of the lessons are:

Block grants are more vulnerable to funding cuts than "categorical" programs.

  • Without defined standards and targets, the main purpose of the program can be lost.
  • Congressional oversight over state use of block grant money wanes over time.
  • Cities tend to be the losers when money is reallocated at the state level.
  • The working poor tend to be the losers under state designed eligibility rules.
  • States generally reduced standards to save money.


The states may be tempted – in the midst of their own budget crises, block grants that they can use free of restrictions may be viewed as an attractive way to reduce budget shortfalls. However, while the "flexibility" looks good to states now, history has shown that in the long-term states will get less. Flexibility without any resources to be flexible with is not a good bargain.

The one constant is that block grants are used as a way of reducing federal domestic spending, just like tax cuts. Block grants should be seen as just another tool of this Administration to shrink the role of the federal government in ensuring the health, safety and welfare of all Americans. Low-income programs are being targeted in an effort to ultimately dismantle the role of the federal government in providing a safety net for the most vulnerable. Freeing the federal government from funding obligations like entitlements is an important step in allowing the government to pass more tax cuts for the wealthy.