Summary

The 15 block grant programs in effect today, with funding of $32 billion, constitute a small portion of the overall federal aid to states, which totaled $206 billion for 593 programs in fiscal year 1993. In 1981, as part of the Omnibus Reconciliation Act, nine block grants were created from about 50 of the 534 categorical programs in effect at that time. In general, the transition from categorical programs to block grants was smooth. Experience with the 1981 block grants teaches three lessons. First, accountability for results is clearly needed, and the Government Performance and Results Act may provide the appropriate framework. Second, funding allocations based on distributions under prior categorical programs may be inequitable because they do not reflect need, ability to pay, and variations in the cost of providing services. Finally, the transition to block grants may be more challenging today than in 1981 because the programs being considered for inclusion in block grants are much larger and, in some cases, are fundamentally different from programs included in the 1981 block grants. GAO summarized this report in testimony before Congress; see: Block Grants: Lessons Learned, by Linda G. Morra, Director of Education and Employment Issues, before the House Committee on Economic and Educational Opportunities, House Subcommittee on Oversight and Investigations. GAO/T-HEHS-95-80, Feb. 9, 1995 (11 pages).

GAO found that: (1) 15 block grants with funding of $32 billion constituted a small portion of the total federal aid to states in fiscal year 1993; (2) in 1981, Congress created 9 block grants from about 50 categorical programs to broaden program flexibility among states; (3) the states' transition to block grants was generally smooth, since the states had existing management and delivery systems for most programs, but they had difficulties in two areas because these categorical programs were entirely federally funded or directed; (4) states reported administrative efficiencies with block grants, but documenting the cost savings was difficult; (5) although the states experienced a 12-percent funding reduction under the block grants, they used various approaches, such as using carry-over funds and additional state revenues, to help them offset the funding reductions; (6) problems with the 1981 block grant included inequitable initial state allocations, the lack of useful information for Congress and program managers to effectively oversee the grants, and reduced state flexibility due to Congress recategorizing some grants; (7) lessons learned from the 1981 experience should focus on accountability for results, equitable funding allocations based on state need, ability to pay, and cost of services; and (8) states could encounter greater transition difficulties with the larger, more complex programs being considered for inclusion in the new block grants.