Two government budget practices can have both significant implications for lower levels of government and consequences for the success or failure of the government’s goal: block grants and unfunded mandates.
Block grants pass decision-making authority and fiscal responsibility to a lower level of government. When a program is converted to a block grant, the lower level of government obtains broad latitude for spending the money. In exchange, the higher level of government generally caps the amount of money available each year to fulfill the program’s purpose.
Block grants can be a good way to empower people at the state and local level, who may be more familiar with the needs of a population, to make decisions about service delivery. On the other hand, block grants can be problematic if they supplant funds that the lower level of government had previously spent, if quality controls are inadequate or if insufficient money is provided to achieve the intended purpose.
Sometimes a higher level of government makes demands of lower levels of government without providing necessary resources. These unfunded mandates pass the fiscal burden to the lower level of government. Without federal government resources to fulfill the mandate, states must spend their own funds, potentially displacing their other priorities.
BLOCK GRANTS AND UNFUNDED MANDATES: Policy
Passing responsibilities down to lower levels of government should be undertaken primarily to place services closer to the people being served and to maximize administrative efficiencies, not as a way to reduce costs.
When a higher level of government determines that a lower level of government should perform a necessary function, adequate resources must be made available to accomplish the task.
Services should be implemented and operated by the level of government that can most appropriately and efficiently deliver them. Grants should be structured to ensure that the lower level of government maintains the prior level of funding.
Funding formulas and allocation decisions should accommodate changes in demographics and inflation to meet the needs of benefit recipients, reflect localities’ needs and ability to raise revenues, and accommodate variations in service-delivery cost.
Discretionary decisions about the use of block-grant allocations should be made in the open, provide adequate advance notice and information to affected stakeholders, and consider input from affected stakeholders. People who cannot attend meetings in person should still be able to provide feedback.