A block grant is money that is awarded by a national government to state and local officials. Block grants are earmarked for a specific project or projects, and typically have guidelines as to how the money can be spent. In addition, state and local governments add their own guidelines and will sometimes distribute a portion of the grant to other organizations, which may also impose rules regarding how the money is used and for what purpose.

Block grants are given to state and local authorities by the federal government for general purposes, such as public enforcement, law enforcement, or community development. They offer a lot of discretion to the local and state governments in how to spend the money.

History of Block Grants

In the U.S., the federal government is in charge of certain government functions (e.g. national defense), and the local and state governments are in charge of other government functions (e.g. education). One way that the federal government can try to influence state and local governments is by offering grant funding in exchange for complying with their requirements.

Block grants were first issued during the 1960s, following the criticism for categorical grants that had strict regulations. The first block grant was authorized by President Lyndon Johnson for public health in 1966, by combining together a group of 9 categorical grants. In the 1970s and 1980s, many categorical grants were consolidated into corresponding block grants, under the presidencies of Richard Nixon, Ronald Reagan, and George H.W. Bush. Today, block grants are the fastest growing types of government funding, comprising about 15% of federal aid.

How They Work

Block grants are mostly formula-based, which means that states do not have to compete amongst themselves to obtain them. States are entitled to such grants if they satisfy certain conditions decided by Congress. Formula-based block grants typically favor smaller states.

The biggest advantage that block grants offer is the discretion for states to choose how to use the funds. In addition, block grants require programs to be implemented under fewer restrictions. An example of a block grant in the United States is the Community Development Block Grant (CDBG) program under the Department of Housing and Urban Development. Another example of a well-known block grant is the Mental Health Block Grant.

Block Grants vs. Categorical Grants

Comparatively, categorical grants are federal funds given to regional governments or agencies, which are to be used only on specific issues (e.g. airport construction, road repairs, etc) and have strict restrictions. Additionally, in order to become eligible for categorical grants, interested states have to put up matching funds.

Categorical grants could be either project-based or formula-based. When project-based, states compete amongst themselves, and the funding goes to the most suitable proposal. When formula-based, states receive the funding as a matter of right. Most grants authorized today fall under the project-based category.