ERIC Number: ED402684
Record Type: RIE
Publication Date: 1996-Dec
Reference Count: N/A
Federal Grants: Design Improvements Could Help Federal Resources Go Further. Report to the Chairman, Committee on the Budget, House of Representatives.
General Accounting Office, Washington, DC. Accounting and Information Management Div.
Intergovernmental grants are a significant part of both federal and state budgets. This report examines the federal grant-in-aid system from the perspective of fiscal impact. It focuses on the extent to which the grant system succeeds in two objectives: (1) encouraging states to use federal dollars to supplement rather than replace their own spending on nationally important activities; and (2) targeting grant funding to states with relatively greater programmatic needs and fewer fiscal resources. The first major finding is that every additional federal grant dollar results in less than a dollar of total additional spending on the aided activity: the estimates of substitution clustered around 60 cents of every federal dollar. Therefore, part of the fiscal impact of these transfers is to free up a portion of state funds for other state programs or tax relief. In addition, federal aid is not targeted to offset fiscal imbalances among states with different programmatic needs and fiscal resources. The second major finding is that grant design influences fiscal substitution. Design features work by restricting the use of funds to specify purposes, requiring recipients to contribute their own funds to obtain grant funds, and not restricting federal matching of state funds. Finally, the study found that grants lack features to discourage substitution. Four figures and 11 tables are included. Appendices contain information on the role of grants in the federal system, the research design, three grant design features related to substitution, statistical analyses, challenges in measuring grant-targeting factors, and a list of major contributors to the report. (Contains a 24-item list of related GAO products and 51 references.) (LMI)
Descriptors: Block Grants, Categorical Aid, Econometrics, Economic Impact, Economic Research, Educational Finance, Efficiency, Elementary Secondary Education, Expenditures, Federal Aid, Federal State Relationship, Financial Support, Fiscal Capacity, Grants, State Federal Aid
U.S. General Accounting Office, P.O. Box 6015, Gaithersburg, MD 20884-6015 (first copy free; $2 each additional copy; quantity discount).
Publication Type: Reports - Research; Reports - Evaluative
Education Level: N/A
Authoring Institution: General Accounting Office, Washington, DC. Accounting and Information Management Div.