The Welfare Reform Boomerang

"Block Grants: A Perennial, but Unstable, Tool of Government" by Paul L. Posner and Margaret T. Wrightson, in Publius: The Journal of Federalism (Summer 1996), Meyner Center for the Study of State and Local Government, 16 Kirby Hall of Civil Rights, Lafayette College, Easton, Pa. 18042–1785.

Last year’s controversial welfare reform is any guide, the pressure to reverse course is measure ended Aid to Families with likely to grow very strong in the years ahead, Dependent Children (AFDC) as an entitle-argue Posner and Wrightson, director of fedment and provided for federal block grants to eral budget issues and assistant director of the states instead. If the history of such grants federal management issues, respectively, at the U.S. General Accounting Office.

Block grants provide each state a fixed sum for a broadly defined purpose, and considerable latitude in how to spend it. (The more widely used categorical grants spell out in detail what states must do with the money.) Although they accounted for only about 16 percent of the $213 billion in federal grants in fiscal year 1995, block grants have been an intermittently popular way of addressing national problems. In 1974, for instance, in response to the perceived failure of urban renewal programs, Congress created the Community Development Block Grant program. In 1981, President Ronald Reagan eliminated almost one in five categorical grants in areas such as public health and certain social services, setting up block grants instead.

"The record shows that states have often maintained a basic continuity in the delivery of block-granted services," Posner and Wrightson observe. Surprisingly, after recovering from the recession of the early ‘80s, states even used their own funds to make up for federal cuts in long-standing state programs in health and social services.

Yet on some 58 occasions between 1983 and 1991, Congress added new categorical provisions or restrictions to the block grants.

Congress also cut funding even as it provided new categorical grants in the same areas. Why? Members of Congress are able to claim credit for new categorical grants, the authors say, whereas most credit for implementing block grants goes to state and local officials. Also, many interest groups are stronger in Washington than in state capitals, and they like "targeted" grants.

But given the continuing pressure to cut federal spending, block grants are likely to retain their appeal, particularly for openended entitlement programs. The federal government can cap spending and shift the painful choices to the states, while the states, in turn, can blame the feds for forcing them to make those choices.

Many observers fear that states will not perform as well with block grants for entitlement programs such as welfare as they did with the block grants initiated in the early 1980s—that they will engage in "a race to the bottom" on benefits. But even if the states do a good job, the authors conclude, unless Congress and interest groups take federalism more to heart, history suggests that in the long run the states could well find themselves faced with reduced federal funding and "creeping requirements."