A block grant is a large sum of money given to a regional or state government with broad provisions for its use. In contrast to more traditional categorical grants, which have many rules and regulations predetermining how the grant money must be spent, block grants allow substantial autonomy to the receiving government to decide how to spend the money. These types of grants are often requested to fund various social or community programs benefitting mid- and low-income individuals such as child and elderly welfare, aid for homeless, community clean-up and improvement, low-income healthcare, and others.
The efficacy of block grants has been widely debated. Proponents of block grants argue that local governments have a better understanding of the needs of their communities.Consequently, awarding block grants gives control of federal money to the states and provides some level of power balance between federal and state governments. Because most block grant proposals are meant as a replacement for existing entitlement programs (funded programs thought to be entitled to certain citizens such as welfare programs, social security, and unemployment), proponents argue that block grants would reduce the “uncontrollable aspects” of these programs, specifically that there aren’t technically any caps, compared to the predetermined limit of a block grant.
Pushback against block grants has been aggressive, with critics calling them ‘cutbacks in disguise’. The nonpartisan Center on Budget and Policy Priorities cites three major issues with replacing entitlement programs with block grants. First, entitlement programs are designed to automatically adjust in response to change in need. Block grants do not have this built-in feature; if a recipient finds that they need an increase in funding, they mustreapply. Consequently, a second major problem is that funds historically tend to be insufficient compared to program participant need, resulting in reduction or loss of benefits. A third problem stems from the regulatory flexibility: while entitlement programs come with strict regulations that regulate how the money can be used and on whom, block grants do not. Lack of such standards enables states to justifiably shift funds to cover other state deficits, taking additional money from programs.
Despite theoretical benefits, empirical data supports the critics. A retrospective analysis of proposed block grants to replace Medicaid found that estimates were inconsistent with reality, and initiation of any of the proposed block grants over those years would have resulted in loss of benefits for a substantial amount of the neediest people. More moderate critics believe that development of better ways to estimate need and cost could help mitigate some of these problems and increase the reliability and utility of block grants, acknowledging that this would indicate the need for an increase in funding over time rather than the traditional decrease experienced by current block grants.