Want to Cut a Program Without Saying So? Turn it into a Block Grant

Isaac Shapiro, Center on Budget and Policy Priorities, posted on

Block grants have long been a central conservative policy priority. In contrast to entitlements, these federal grants are provided in lump sums to state and local governments and offer exceptionally wide-ranging discretion in how the money is spent. And with Republicans in control of Congress and the White House, we can expect a continued push for block grants and other similar reforms. The potential targets include the SNAP (food stamps) program and Medicaid, which House Republican leaders have just suggested should be converted to the structural cousin of block grants, the “per capita cap.”

This push could do severe damage to the safety net, as a recent Center on Budget and Policy Priorities report I co-authored indicates. We undertook a comprehensive review of the funding of low-income block grants, finding one unmistakable lesson: the funding of housing, health, and social services block grants – and thus their ability to help those in need – tends to fall significantly over time.

In our paper, we found that since 2000, overall funding for the 13 major low-income block grant programs has fallen by 27 percent after adjusting for inflation, and by 37 percent after adjusting for inflation and population growth.

Measuring from the year in which each block grant was established in its current form, all but one of these block grants have shrunk after adjusting for both inflation and population growth (see the figure below). Four programs have been cut by more than half, including the program aimed at providing job training for low-income adults and youths.

The largest block grant program on the list is Temporary Assistance for Needy Families (TANF). Congress famously replaced Aid to Families with Dependent Children (AFDC) with TANF in 1996. Its story is particularly relevant to this year’s debate as it also represents the one example on our list where an entitlement program like SNAP or Medicaid – which automatically provides aid to those who qualify – was converted to a block grant.

TANF’s annual federal funding has remained essentially unchanged in nominal terms since it was established, and has fallen sharply after considering inflation and population growth. Partly for this reason, TANF today provides substantially less protection against poverty than AFDC did. In 1996, for every 100 poor families with children, 68 families received AFDC cash assistance. By 2015, only 23 families with children received TANF cash assistance benefits for every 100 poor families. The amount of basic assistance TANF provides has also dropped as states have used their added flexibility under the block grant to shift funds to other purposes.

More generally, the block grant structure intrinsically makes such programs vulnerable to funding reductions. As mentioned at the outset, block grants are usually designed to give state and local governments very broad flexibility over their use of federal funds. As a result, the funds are used in a variety of ways and their impact is hard to document. That, in turn, makes it easier for national policymakers seeking resources for their own priorities to look to block grants for savings, and has made block grants vulnerable to funding freezes for years on end. It should come as no surprise that block grants in general have fared very poorly in the competition for resources.

The shifting politics around the Social Services Block Grant (SSBG) is illustrative. In 1981, President Reagan argued for creating new block grants by saying they were needed “to reduce wasteful administrative overhead and to give local governments and states more flexibility and control.”

Funding for SSBG has been reduced by 81 percent since it was established in 1982, after adjusting for inflation and population. Recently, and ironically, House Republicans have proposed eliminating SSBG, with House Ways and Means Committee Chairman Kevin Brady calling it a “no-strings-attached slush fund for states with no accountability.”

Policymakers should keep this history in mind when considering new block-grant proposals and claims that merging programs into broad block grants will improve results for the families the programs serve. Experience suggests, to the contrary, that the most predictable result of merging social programs into broad block grants is substantial erosion in funding over time, sharply undercutting the amount of aid they provide to meet health, housing, job training, income, and social services needs.

Isaac Shapiro is a senior fellow at the Center on Budget and Policy Priorities.

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