    [Analytical Perspectives]
    [Special Analyses and Presentations]
    [9. Aid to State and Local Governments]
    [From the U.S. Government Publishing Office, www.gpo.gov]

                   9.  AID TO STATE AND LOCAL GOVERNMENTS /1/

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      \1\ Federal aid to State and local governments is defined as the
    provision of resources by the Federal Government to support a State or
    local program of governmental service to the public. The three primary
    forms of aid are grants, loan subsidies, and tax expenditures.
    ---------------------------------------------------------------------------
       State and local governments have a vital constitutional
    responsibility to provide government services. They have the major role
    in providing domestic public services, such as public education, law
    enforcement, roads, water supply, and sewage treatment. The Federal
    Government contributes to that role both by promoting a healthy economy
    and by providing grants, loans, and tax subsidies to State and local
    governments.
       Federal grants help State and local governments finance programs
    covering most areas of domestic public spending, including income
    support, infrastructure, education, and social services. Federal grant
    outlays were $284.7 billion in 2000 and are estimated to increase to
    $316.3 billion in 2001 and $350.1 billion in 2002.
       Grant outlays for payments for individuals, such as Medicaid, are
    estimated to be 63.6 percent of total grants in 2002; for physical
    capital investment, 16.1 percent; and for all other purposes, largely
    education, training, and social services, 20.3 percent.
       Federal aid to State and local governments is also provided through
    tax expenditures. Tax expenditures are the result of special exclusions,
    exemptions, deductions, credits, deferrals, or tax rates in the Federal
    tax laws.
       The two major tax expenditures benefitting State and local
    governments are the deductibility of personal income and property taxes
    from gross income for Federal income tax purposes, and the exclusion of
    interest on State and local public purpose bonds from Federal taxation.
    These provisions, on an outlay equivalent basis, are estimated to be
    $102.7 billion in 2001 and $108.0 billion in 2002. A detailed discussion
    of the measurement and definition of tax expenditures and a complete
    list of the amount of specific tax expenditures are in Chapter 5, ``Tax
    Expenditures.'' As discussed in that chapter, there are generally
    interactions among tax expenditure provisions, so that the estimates
    above only approximate the aggregate effect of these provisions.
       Tax expenditures that especially aid State and local governments are
    displayed separately at the end of Table 5-5 in that chapter.

                   Table 9-1.  FEDERAL GRANT OUTLAYS BY AGENCY
                            (In billions of dollars)
    ------------------------------------------------------------------------
                                                                Estimate
                        Agency                       2000  -----------------
                                                    Actual    2001     2002
    ------------------------------------------------------------------------
    Department of Agriculture....................     19.0     20.5     21.2
    Department of Commerce.......................      0.5      0.7      0.6
    Department of Education......................     22.2     24.5     27.1
    Department of Energy.........................      0.1      0.2      0.3
    Department of Health and Human Services......    162.5    184.5    208.3
    Department of Housing and Urban Development..     25.1     26.7     27.8
    Department of the Interior...................      2.2      2.7      2.6
    Department of Justice........................      4.8      4.2      5.8
    Department of Labor..........................      7.3      8.3      9.1
    Department of Transportation.................     32.2     35.3     38.3
    Department of the Treasury...................      0.5      0.5      0.4
    Department of Veterans Affairs...............      0.4      0.4      0.5
    Environmental Protection Agency..............      3.5      3.6      3.8
    Federal Emergency Management Agency..........      2.5      2.4      2.5
    Other agencies...............................      1.8      1.8      1.8
                                                  --------------------------
     Total.......................................    284.7    316.3    350.1
    ------------------------------------------------------------------------

       Table 9-1 shows the distribution of grants by agency. Grant outlays
    for the Department of Health and Human Services are estimated to be
    $208.3 billion in 2002, 59.5 percent of total grants, more than five
    times as much as any other agency.

                      HIGHLIGHTS OF THE FEDERAL AID PROGRAM

       Major proposals in this budget affect Federal aid to State and local
    governments and the important relationships between the levels of
    government. Through the use of grants, the Federal government can share
    with State and local governments the cost and, ultimately, the benefits
    of a better educated, healthier, and safer citizenry. The Administration
    is committed to working with State and local governments to make our
    Federal system more efficient and effective and to improving the design,
    administration, and financial management of Federal grant programs. One
    way the Administration will do this is by expanding a government-wide
    effort to use electronic processing in the administration of grant
    programs.
       This budget reflects the Administration's commitment to giving State
    and local governments increased flexibility. Through the use of grants,
    Federal agencies can create partnerships with State and local
    governments that focus on common goals and the progress made toward
    meeting them. The Administration's efforts to improve the grant
    administration process will include efforts to consolidate grants that
    support programs with similar missions to create one flexible grant, and
    ex

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    pand transfer authorities for public health grants to remove barriers to
    target resources.
       In addition, this budget proposes several initiatives to help all
    children read by the third grade; improve the services provided to
    Indian children to address their unique educational and cultural needs;
    assist low income working parents obtain quality after school childcare
    with a strong educational component; establish positive incentives for
    private landowners and local communities to preserve land and protect
    imperiled species; aid counties along the Southwest Border with costs
    associated with federally-referred drug cases; and expand transportation
    and employment options for people with disabilities.
       Highlights of grants to State and local governments follow. For
    additional information on grants, see the detailed Table 9-3 in this
    Chapter, A Blueprint for New Beginnings (February 28, 2001), or Section
    III of the Budget volume.

    Education

       The budget requests $29.8 billion in 2002 program level for the
    Department of Education for grants to States and local governments for
    education, an increase of $3.3 billion above the 2001 amount of $26.5
    billion. These program levels do not equate with 2001 and 2002 budget
    authority, which are distorted by advance appropriations. The budget
    proposes to reverse the misleading budget practice of using advance
    appropriations simply to avoid spending limitations. The education
    proposals in this budget will help States improve accountability for
    school and student performance, enhance teacher quality, increase
    flexibility, and support innovative programs.
       The President's plan would grant States and school districts
    unprecedented freedom from rules and regulations--in exchange for
    accountability for results. States will establish accountability systems
    built on high standards, annual tests, measurable goals, rewards for
    success, and sanctions for failure. They will be required to test
    students every year in grades 3-8 in math and reading so that parents,
    teachers, and communities will know if their schools and students are
    meeting State academic standards. The budget provides $320 million to
    support the costs of developing new assessments. Once accountability
    systems are in place, a new Federal fund will reward States and schools
    that improve student achievement.
       The budget requests $9.1 billion for Title I Grants to Local
    Educational Agencies (LEAs) to help improve achievement among students
    most at-risk of not reaching State academic standards. The Title I
    program enables high-poverty schools to provide extra educational
    assistance to their students so they can catch up with their peers. The
    President's plan would require States to set measurable performance
    targets to ensure that all groups of disadvantaged students improve, and
    would hold schools accountable for meeting those goals. Schools that
    fail to meet performance targets will receive help to turn themselves
    around. The Administration seeks $400 million for 2002 within Title I
    Grants to LEAs for low-performing schools, a $175 million or 78 percent
    increase over 2001. States and districts will use these funds to provide
    technical assistance and intensive interventions to improve achievement
    in schools that are failing to make sufficient academic gains. Students
    in schools that are consistently low-performing will have the option of
    transferring to a better public school, or of using their share of
    Federal Title I funds to seek supplemental educational services or
    private school alternatives. This combination of accountability for
    improved achievement among all groups of students, extra help for
    struggling schools, and the unacceptability of chronic failure, provides
    powerful incentives for all Title I schools to use their funds on
    effective, proven practices in order to achieve results.
       The budget builds a foundation for success by investing $900 million
    for 2002 in the Reading First initiative to help all children read by
    third grade. This new program will provide funds to States that
    establish comprehensive reading programs in kindergarten through second
    grade. States would be required to implement scientifically-proven
    reading programs, train K-2 teachers in proven teaching practices,
    implement effective reading interventions for students who are falling
    behind, and use a reading diagnostic test in K-2 to identify students
    early who have reading difficulties. Ensuring that children receive
    effective reading instruction means that more children will get the help
    they need before they fall too far behind, and will result in fewer
    referrals to special education in later years. The budget also includes
    $75 million for the Early Reading First initiative that helps implement
    research-based reading practices in existing pre-school and Head Start
    programs that feed into participating elementary schools. This program
    will help ensure that children enter school ready to learn to read.
      The budget proposes $2.6 billion in 2002, an increase of $0.4 billion
    above 2001, to prepare, train, and recruit a high-quality teaching
    force. States would have the flexibility to invest these funds to
    address their most pressing quality improvement needs, whether it be to
    alleviate shortages, enhance skills, or reform the certification
    process. The President's plan combines funding from the largest Federal
    teacher programs, including the Class Size Reduction program and
    Eisenhower Professional Development programs into a streamlined,
    performance-based grant to States and school districts.
       The Administration supports a streamlined educational technology fund
    that consolidates eight overlapping programs into one flexible $817
    million fund for 2002. The President believes that technology must be
    used to improve learning and that Federal funding for educational
    technology must focus on results. This performance-based formula grant
    will provide States greater discretion to make educational technology an
    effective learning tool, and ensure that more technology funds reach the
    classroom.
       In addition to these reforms, the Administration is seeking
    administrative improvements in the E-rate pro

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    gram to ensure that this program provides greater flexibility to schools
    and libraries in how they use their E-rate discounts, while reducing the
    administrative burden they have faced in applying for educational
    technology funds. The E-rate program, or Education Rate, is administered
    by the Federal Communications Commission and provides discounts for
    schools and libraries to purchase high-speed Internet access, internal
    wiring, and telecommunications services. The Administration also
    proposes $80 million in matching grants, through the Department of
    Housing and Urban Development's Community Development Block Grant, to
    support Community Technology Centers in high poverty areas.
       A variety of other innovative programs to improve the educational
    development of the Nation's students is proposed, or expanded from
    previous funding levels.
         The budget provides $200 million for an expanded Math and
              Science Partnership program, administered by the National
              Science Foundation in coordination with the Department of
              Education, in order for States to join with institutions of
              higher education to strengthen K-12 math and science
              instruction and curriculum.
         The Administration proposes to consolidate Bilingual
              Education, Foreign Language Assistance, and Immigrant
              Education funds into a $460 million formula-driven grant to
              provide school districts with added flexibility in exchange
              for more effective transitioning of Limited-English proficient
              (LEP) students into English fluency and improving their
              overall achievement levels. Funds will be distributed to
              States based on their shares of LEP and immigrant students.
         The Administration requests $116 million to support formula
              grants to local educational agencies and Bureau of Indian
              Education (BIA)-operated schools to implement programs that
              address the unique educational and cultural needs of Indian
              children. This level of funding will also fund the second
              cohort of Native American teachers through the American Indian
              Teacher Corps Initiative and continue funding for the American
              Indian Administrator Corps.
         The most direct form of accountability is a parent's
              ability to choose the school his or her child will attend. The
              Administration is committed to expanding the educational
              choices that parents and students have. Under the new Choice
              and Innovation fund, the Administration proposes to
              consolidate ten programs to create a $471 million fund that
              provides States with the flexibility to pursue a range of
              effective education reform strategies and to address areas of
              State and local need.
         The President's plan for improving school safety and drug-
              use prevention emphasizes research-based practices, includes
              tougher enforcement of existing gun laws, grants teachers
              control over their classrooms, improves cooperation between
              school districts and law enforcement, and stresses
              accountability for results. Under the $644 million Safe and
              Drug Free Schools and Communities program, districts will be
              held accountable for the effectiveness of their crime
              prevention and drug outreach activities, and students trapped
              in persistently dangerous schools will have the option to
              transfer to a safer alternative.
         The Administration request includes $846 million for a more
              flexible after-school program that allows States and school
              districts to award Federal funds to private and faith-based
              entities, thereby empowering local communities to provide a
              wider array of choices for students and parents. Expanding
              access to high-quality before- and after-school programs is a
              key strategy in providing students safe and supervised
              environments and extending learning time to improve student
              achievement. States would conduct grant competitions to
              support before and after-school programs that are proven to be
              effective and advance statewide academic achievement goals.

                 This program will be supplemented by a new $400 million
              initiative in the Department of Health and Human Services for
              After School Certificates within the Child Care and
              Development Block Grant to help low income working parents
              obtain quality after school childcare with a strong
              educational component.
         The Administration requests $8.1 billion for 2002, $1.0
              billion more than 2001, for three special education programs
              that serve more than six million children with disabilities
              from birth to age 21. This increased funding will further help
              States and local school districts meet their obligations under
              the Individuals with Disabilities Education Act.
         The budget proposes $1.1 billion for the Impact Aid
              program, $137 million more than the 2001 appropriation. The
              request provides a significant increase for the Impact Aid
              construction program to improve the quality of public school
              buildings and eliminate the backlog of repairs and
              construction for schools on or near military facilities and
              those serving children from Native American lands.

    Training and Employment

       The budget reflects the Administration's continued support to reform
    the Nation's workforce development system and provide job training
    opportunities to help workers succeed in the economy of the 21st
    Century.
       The Workforce Investment Act (WIA) of 1998 took full effect on July
    1, 2000, as the Job Training Partnership Act was repealed and all States
    began to fully implement the WIA requirements. The WIA calls for a
    customer-driven job training system that: (1) streamlines services
    through One-Stop Career Centers; (2) empowers individuals with the
    information and resources they need to choose the training that is right
    for them; (3) provides universal access to a core set of employ

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    ment services such as job search assistance; (4) increases
    accountability; (5) ensures a strong role for the private sector and the
    local boards who develop and oversee programs; (6) facilitate State and
    local flexibility; and (7) improve the quality of youth job training
    services. The budget proposes $5.1 billion for these activities, which
    does not equate with 2002 budget authority, which is distorted by
    advance appropriations. The budget proposes to reverse the misleading
    budget practice of using advance appropriations simply to avoid spending
    limitations.
      In order to enhance the employment prospects of individuals with
    disabilities, the budget includes $20 million for competitive grants to
    partnerships or consortia to provide new services and information for
    individuals with disabilities who want to return to work. These
    partnerships would work with the One-Stop system to augment its
    capabilities to provide timely and accurate information that people with
    disabilities need to get jobs and learn about the benefits available to
    them when they return to work. In addition, the partnerships would
    improve local service delivery by coordinating the State and local
    agencies and disability organizations that help individuals with
    disabilities prepare to enter or reenter the workforce.

    Social Services

       The Head Start program gives low-income children a comprehensive
    approach to child development, stressing language and cognitive
    development, health, nutrition, and social competency. Head Start is
    administered by the Administration for Children and Families (ACF). The
    Administration requests $6.3 billion for Head Start, a $125 million
    increase over the 2001 level. In 2002, Head Start will serve
    approximately 916,000 children. Within the overall total of children
    served, approximately 55,000 children under age three will participate
    in the Early Head Start component. The Administration proposes to reform
    Head Start and return it to its original purpose--education. Head Start
    programs will be required to adopt a proven core curriculum that makes
    school readiness--pre-reading and numeracy--its top priority. The budget
    includes an Early Reading First program within the Department of
    Education for research-based reading programs in existing pre-school
    programs, including Head Start programs. Planning is also underway to
    move Head Start to the Department of Education to reinforce the emphasis
    on school readiness.
       This budget requests $1.7 billion in budget authority for the Social
    Services Block Grant (SSBG). This program provides flexible funds to
    States for social services for low-income individuals and families.

    Income Support

       Food and nutrition assistance.--This budget requests $9.9 billion in
    budget authority for grants for the National School Lunch and School
    Breakfast Programs, which provide free or low-cost nutritious meals to
    children in participating schools. In 2002, the programs will serve an
    estimated 28.0 million lunches and 8.4 million breakfasts daily. By
    2005, the program aims to reduce the average percent of calories from
    saturated fat in school lunches to 10 percent, down from 12 percent in
    1998-1999. The Special Supplemental Nutrition Program for Women,
    Infants, and Children (WIC) provides vouchers for nutritious
    supplemental food packages, nutrition education and counseling, and
    health and immunization referrals to low-income women, infants, and
    children. The program reached an average of nearly 7.2 million people
    each month in 2000. Participation in 2001 is projected to exceed 7.2
    million women, infants, and children monthly, and the budget proposes
    $4.1 billion, an increase of $94 million, to serve 7.25 million people
    monthly in 2002.
       Other income security.--The Child Care and Development Fund provides
    grants to States for the purposes of providing low-income families with
    financial assistance for child care, improving the quality and
    availability of child care, and establishing, expanding, or conducting
    early childhood development programs and before- and after-school
    programs. In 2000, Federal child care funding provided child care
    services for approximately 1.8 million children from low-income working
    families or whose parents are moving from welfare to work. The budget
    proposes a new $400 million after school certificate program within the
    Child Care and Development Block Grant, raising the total request to
    $2.2 billion in budget authority. The new program would provide grants
    to States to assist up to 500,000 parents in obtaining after-school
    child care with a high-quality education focus.

    Health

       This budget proposes $164.0 billion in outlays for 2002 grants to
    State and local governments for health, $22.2 billion more than for
    2001.

       Immediate Helping Hand (IHH).--The Immediate Helping Hand initiative
    provides critical assistance to our Nation's most vulnerable senior
    citizens for the cost of their prescription drugs. This budget provides
    $46.0 billion for 2001-2005 to States to help low-income Medicare
    beneficiaries pay for their prescriptions. This proposal builds on
    coverage that is already in place in more than half the States and would
    provide benefits to 9.5 million vulnerable Medicare beneficiaries who
    currently do not have any other prescription drug coverage. The plan is
    unique because needy seniors will be able to get help with their
    prescription drug costs this year.
       Medicaid.--Medicaid is the largest grant program, with outlays
    projected to be $142.4 billion in 2002, including the changes proposed
    in this budget. This Federal-State health care program served about 33.4
    million low-income Americans in 2000. The Federal Government spent
    $117.9 billion, 57 percent of the total, on the program in 2000 while
    States spent $88.9 billion, or 43 percent. Medicaid covers a fourth of
    the Nation's

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    children and is the largest single purchaser of maternity care as well
    as of nursing home services and other long-term care services. The
    program covers almost two-thirds of nursing home residents. The elderly
    and disabled made up a third of Medicaid enrollees in 2000, but
    accounted for approximately two-thirds of spending on benefits. Medicaid
    serves at least half of all adults living with AIDS (and up to 90
    percent of children with AIDS), and is the largest single payer of
    direct medical services to adults living with AIDS. Medicaid pays for
    over one-third of the Nation's long-term care services. Medicaid spends
    more on institutional care today than it does for home and community-
    based care, but the mix of payments is expected to be almost equal in 10
    years.
      Current restrictions and requirements in the Medicaid program may be
    inhibiting the ability of States to operate the program efficiently. In
    addition to taking steps to further address the Medicaid ``upper payment
    limit'' loophole, the Administration plans to consult with the States on
    the development of ideas to increase State flexibility, control Medicaid
    costs, and ensure the fiscally prudent management of the Medicaid
    program.

      State Children's Health Insurance Program.--The State Children's
    Health Insurance Program (S-CHIP) was established in 1997 in the
    Balanced Budget Act to provide $24 billion over five years for States to
    expand health insurance coverage to low-income, uninsured children. S-
    CHIP provides States with broad flexibility in program design while
    protecting beneficiaries through basic Federal standards. In 2000, 3.3
    million children were enrolled in S-CHIP, which is a 70 percent increase
    over 1999 enrollment.
       Other health.--This budget requests Federal spending for certain
    public health programs that assist State and local governments in
    increasing access to health care by increasing the number of community
    health center sites and addressing heart disease, diabetes, and
    childhood obesity. The budget includes a Community and Migrant Health
    Center Initiative to increase access to health care by increasing the
    number of community health center sites by 1,200 over five years. In
    2002, the number of health center sites will increase by almost 100. The
    Administration proposes $1.3 billion in 2002 for this effort, an
    increase of $124 million over 2001. The Administration also proposes the
    Healthy Communities Innovation Fund Initiative, which supports grants
    that will make available approximately $400 million within existing
    grant activities to target innovative solutions in areas of health risks
    such as heart disease, adult and childhood Type II diabetes, and
    childhood obesity.

    Natural Resources and Environment

      The Administration requests $900 million from the Land and Water
    Conservation Fund (LWCF) to acquire and conserve lands in national
    parks, forests, refuges, and public lands, and provide grants to States
    for broad conservation and outdoor recreation purposes. The National
    Park Service (NPS) requests $450 million in budget authority for 2002
    for LWCF matching grants to States in support of State and local
    conservation and outdoor recreation efforts. In 2002, two new programs
    are proposed that would establish positive incentives for private
    landowners and local communities to protect imperiled species and
    restore habitat: $50 million in matching grants to help States establish
    Landowner Incentive Programs to help private landowners protect
    imperiled species, and $10 million to establish a Private Stewardship
    Grant Program to provide funding for private conservation initiatives.
       The budget assists State and local governments to add 400 miles of
    recreational trails, 850 miles of recreational river corridors, and
    169,000 acres of recreational parkland, through the LWCF State grants
    and NPS partnerships. In addition, the States and Tribes would receive
    $1.1 billion in grants in 2002, the highest level ever, to administer
    delegated programs and other responsibilities pursuant to Environmental
    Protection Agency (EPA) statutes. Included in this total is $25 million
    in new funding for State enforcement programs, reflecting a shift in
    enforcement responsibilities in delegated States from Federal
    enforcement to expanded State enforcement. The total also includes $25
    million in grant funding to help States better integrate their
    environmental information systems.
       Funding is provided for EPA State Wastewater Grants to fund the Clean
    Water State Revolving Funds at $850 million and the newly authorized
    Sewer Overflow Control Grant program at $450 million. The EPA Drinking
    Water State Revolving Fund is funded at $823 million.

    Administration of Justice

       The Administration requests $4.3 billion in budget authority for 2002
    to help State and local governments fight crime, including $567 million
    to assist crime victims and $154 million in Department of Justice
    initiatives to help State and local governments protect young people
    from gun-related violence. As part of the U.S. Attorney's Project
    Sentry, $20 million in grants will be available to help establish
    partnerships for reducing youth gun violence. The budget also proposes
    $50 million for grants to encourage States to get tough on gun criminals
    with increased arrests, prosecutions, and public awareness campaigns. In
    addition, $75 million will be allocated to Project ChildSafe, a new
    Federal, State and local partnership to ensure that child safety locks
    are made available for every handgun in America. As part of the
    Administration's broader strategy for reducing the supply and demand for
    drugs, $50 million is proposed for a new grant program within the Office
    of Justice Programs to aid counties along the Southwest Border with the
    costs of detaining and prosecuting drug cases referred to them by U.S.
    Attorneys. To combat the significant problem of violence against women,
    the budget proposes $391 million, an increase of $103 mil

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    lion over 2001, to fund both existing and new programs authorized in the
    Violence Against Women Act of 2000.
       This budget proposes to reduce a number of Department of Justice
    State and local assistance programs from their 2001 level, mainly those
    that have already served their primary purpose or are less essential to
    core Federal law enforcement objectives. These reductions include a net
    reduction of $182 million in the Community Oriented Policing Services
    program, which has well exceeded its initial goal of funding 100,000 new
    officers; $451 million from State Prison Grants, which have accomplished
    their goal of encouraging State ``truth in sentencing'' policies; $299
    million from the State Criminal Alien Assistance Program, which
    contributes little to reducing violent crime; $122 million from Local
    Law Enforcement Block Grants, which fund areas covered by other Justice
    programs; and elimination of the $69 million Byrne discretionary grant
    program, whose competitive procedures have been eroded by legislative
    mandates.

    Transportation

       The Administration requests $45.0 billion in budgetary authority in
    2002 for grants to State and local governments to assist with
    transportation infrastructure and related programs, including highways,
    transit, airports and other areas.

       Highways and Transit.--The budget requests $31.6 billion in budgetary
    resources in 2002 for the Federal-aid highways program to maintain and
    improve surface transportation infrastructure. Within this program,
    competitive matching grants are funded at $100 million and pilot
    programs are funded at $45 million, to promote access to alternative
    methods of transportation, a new initiative to expand transportation
    options for people with disabilities.
       In addition, the budget requests $212 million in budget authority for
    highway traffic safety grants to increase seat belt use, decrease
    alcohol related fatalities, and improve State safety data. The budget
    includes $210 million for grants to States to enforce Federal and State
    standards for commercial motor vehicle safety inspections, traffic
    enforcement, and compliance reviews. This budget requests $6.6 billion
    in budgetary resources for 2002 to assist State and local governments
    with mass transit.

      Airports.--The budget requests $3.3 billion in budgetary resources in
    2002 for the Airport Improvement Program (AIP), which will enhance the
    Nation's airport system through increasing safety and security, reducing
    system delays and providing new capacity to meet anticipated demands.

    Community and Regional Development

       Community development.--Community Development Block Grants (CDBG)
    provide funds for various community development activities directed
    primarily at low-and moderate-income persons. This budget requests $4.7
    billion in budget authority for 2002 in CDBG grants for improving
    housing, public works and services, promoting economic development, and
    acquiring or clearing land. The University Partnerships Program, a set-
    aside within CDBG, provides grants to academic institutions including
    Historically Black Colleges and Universities, Hispanic Serving
    Institutions, and Tribal Colleges. The Indian CDBG, also a set- aside
    within the CDBG program, focuses mainly on public infrastructure,
    community facilities, and economic development on reservations.
       The Department of Commerce's Economic Development Administration
    (EDA) provides assistance to communities to help build capacity and
    address long-term economic challenges through its nationwide program
    delivery network. EDA's public works grants help build or expand public
    facilities to stimulate industrial and commercial growth, such as
    industrial parks, business incubators, access roads, water and sewer
    lines, and port and terminal developments. EDA also assists communities
    in addressing sudden and severe economic downturns and in adjusting to
    downsizing and closure of defense facilities. The President's budget
    requests $335 million of budget authority for EDA grants and targets 40
    percent of EDA grants to areas of highest distress nationwide in 2002.
    The budget also proposes $165 million in grant funding and tax
    incentives for Empowerment Zones (EZs) to carry out 10-year, community-
    wide strategic plans to revitalize designated areas.

       Area and regional development.--The budget provides flexible funding
    to meet the needs of rural areas through the Rural Community Advancement
    Program (RCAP). RCAP provides grants, loans, and loan guarantees to
    stimulate economic development, help build rural community facilities,
    such as health clinics, day care centers as well as water and wastewater
    systems. Under RCAP, States have increased flexibility within the three
    funding streams for Water and Wastewater, Community Facilities, and
    Business and Industry. USDA State Directors have the authority to
    transfer up to 25 percent of the funding among any of these programs to
    tailor RCAP assistance to the specific rural economic development needs
    of individual States. The budget proposes $2.9 billion in loans and
    grants for RCAP.
       To fulfill the Federal government's commitments to the District of
    Columbia under the Revitalization Act, the Administration's budget
    provides $494 million for District courts and corrections, including
    $201 million to house the District's sentenced felon population, $147
    million for the Court Services and Offender Supervision Agency, and $146
    million for the DC Courts. In addition, the budget provides $17 million
    to continue the District's Tuition Assistance Grant Program.

    Other Functions

       Discussions of these and other Federal aid programs can be found in
    the main budget volume in Section III, and elsewhere. As noted earlier,
    a detailed listing

    [[Page 201]]

    of budget authority and outlays for all grants to State and local
    governments is in Table 9-3 in this chapter.

                             HISTORICAL PERSPECTIVES

       In recent decades, Federal aid to State and local governments has
    become a major factor in the financing of certain government functions.
    The rudiments of the present system date back to the Civil War. The
    Morrill Act, passed in 1862, established the land grant colleges and
    instituted certain federally-required standards for States that received
    the grants, as is characteristic of the present grant programs. Federal
    aid was later initiated for agriculture, highways, vocational education
    and rehabilitation, forestry, and public health. In the depression
    years, Federal aid was extended to meet income security and other social
    welfare needs. However, Federal grants did not become a significant
    factor in Federal Government expenditures until after World War II.
       Table 9-2 displays trends in Federal grants to State and local
    governments since 1960. Section A shows Federal grants by function.
    Functions with a substantial amount of grants are shown separately.
    Grants for the national defense, energy, and the veterans benefits and
    services functions are combined in the ``other functions'' line in the
    table.

       Federal grants for transportation increased to $3.0 billion, or 43
    percent of all Federal grants, in 1960 after initiation of aid to States
    to build the Interstate Highway System in the late 1950s.
       By 1970 there had been significant increases in the relative amounts
    for education, training, employment, social services, and health
    (largely Medicaid).
       In the early and mid-1970s, major new grants were created for natural
    resources and environment (construction of sewage treatment plants),
    community and regional development (community development block grants),
    and general government (general revenue sharing).
       Since the late 1970s changes in the relative amounts among functions
    reflect steady growth of grants for health (Medicaid) and income
    security and restraint in most other areas. The functions with the
    largest amount of grants are health; income security; education,
    training, employment, and social services; and transportation, with
    combined estimated grant outlays of $325.4 billion or 93 percent of
    total grant outlays in 2002.
       The increase in total outlays for grants overall since 1990 has been
    driven by increases in grants for health, which more than tripled from
    $43.9 billion in 1990 to an estimated $164.0 billion in 2002. The income
    security; education, training, employment, and social services; and
    transportation functions also increased substantially, but at a slower
    rate than the increase for health.
       Section B of the Table shows the distribution of grants divided into
    mandatory and discretionary spending.
       Funding for grant programs classified as mandatory occurs in
    authorizing legislation. Funding levels for mandatory programs can only
    be changed by changing eligibility criteria or benefit formulas
    established in law and are usually not limited by the annual
    appropriations process. Outlays for mandatory grant programs are
    estimated to be $212.0 billion in 2002. The three largest mandatory
    grant programs are Medicaid, with estimated outlays of $142.4 billion in
    2002, temporary assistance for needy families, $17.3 billion in 2002,
    and food stamp grants for State administration and child nutrition
    programs, with combined outlays of $13.9 billion in 2002.
       The funding level for discretionary grant programs is subject to
    approval by Congress annually through appropriations acts. Outlays for
    discretionary grant programs are estimated to be $138.1 billion in 2002.
    Table 9-3 at the end of this chapter identifies discretionary and
    mandatory grant programs separately. For more information on the Budget
    Enforcement Act and these categories, see Chapter 24 ``Budget System and
    Concepts and Glossary'' in this volume.
       Section C of Table 9-2 shows the composition of grants divided into
    three major categories: payments for individuals, grants for physical
    capital, and other grants \2\ Grant outlays for payments for
    individuals, which are mainly entitlement programs in which the Federal
    Government and the States share the costs, have grown significantly as a
    percent of total grants. They increased from 55.9 percent of the total
    in 1990 to 62.2 percent of the total in 2000. While payments for
    individuals will comprise 63.6 percent of grants in 2002, they are
    estimated to increase to an estimated 66.0 percent of the total by 2006.
    ---------------------------------------------------------------------------
      \2\ Certain housing grants are classified in the budget as both
    payments for individuals and physical capital spending. In the text and
    tables in this section, these grants are included in the category for
    physical capital spending.
    ---------------------------------------------------------------------------
       These grants are distributed through State or local governments to
    provide cash or in-kind benefits that constitute income transfers to
    individuals or families. The major grant in this category is Medicaid,
    which had outlays of $117.9 billion in 2000, increasing to an estimated
    $142.4 billion in 2002. Temporary assistance for needy families, food
    stamps, child nutrition programs, and housing assistance are also large
    grants in this category.
       Grants for physical capital assist States and localities with
    construction and other physical capital activities. The major capital
    grants are for highways, but there are also grants for airports, mass
    transit, sewage treatment plant construction, community development, and
    other facilities. Grants for physical capital were almost half of total
    grants in 1960, shortly after grants began for construction of the
    Interstate Highway System. The relative share of these outlays has
    declined, as pay

    [[Page 202]]

                                                                   Table 9-2.  TRENDS IN FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS
                                                                                  (Outlays; dollar amounts in billions)
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Actual                                                                 Estimate
                                                    ------------------------------------------------------------------------------------------------------------------------------------------------
                                                       1960     1965     1970     1975     1980     1985      1990      1995      2000      2001      2002      2003      2004      2005      2006
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    A. Distribution of grants by function:
       Natural resources and environment...........      0.1      0.2      0.4      2.4      5.4       4.1       3.7       4.0       4.6       5.1       5.1       5.1       5.2       5.2       5.1
       Agriculture.................................      0.2      0.5      0.6      0.4      0.6       2.4       1.3       0.8       0.7       0.8       0.8       0.8       0.8       0.8       0.8
       Transportation..............................      3.0      4.1      4.6      5.9     13.0      17.0      19.2      25.8      32.2      35.3      38.3      40.2      41.8      43.6      44.9
       Community and regional development..........      0.1      0.6      1.8      2.8      6.5       5.2       5.0       7.2       8.7       8.7       9.0       9.0       8.7       8.6       8.3
       Education, training, employment, and social       0.5      1.1      6.4     12.1     21.9      17.8      23.4      34.1      42.1      46.8      51.8      56.7      58.1      59.6      61.2
               services............................
       Health......................................      0.2      0.6      3.8      8.8     15.8      24.5      43.9      93.6     124.8     141.8     164.0     177.0     192.6     196.9     208.9
       Income security.............................      2.6      3.5      5.8      9.4     18.5      27.2      35.2      55.1      63.2      69.6      71.3      73.5      75.3      77.0      78.6
       Justice.....................................      ---      ---        *      0.7      0.5       0.1       0.6       1.2       5.1       4.5       6.0       7.5       5.4       4.5       4.5
       General government..........................      0.2      0.2      0.5      7.1      8.6       6.8       2.3       2.3       2.3       2.7       2.6       2.6       3.8       2.6       2.7
       Other.......................................        *      0.1      0.1      0.2      0.7       0.8       0.8       0.8       0.9       0.9       1.1       1.2       1.2       1.2       1.2
                                                    ------------------------------------------------------------------------------------------------------------------------------------------------
         Total.....................................      7.0     10.9     24.1     49.8     91.4     105.9     135.3     225.0     284.7     316.3     350.1     373.6     392.9     400.0     416.2

    B. Distribution of Grants by BEA Category:
       Discretionary...............................       NA      2.9     10.2     21.0     53.3      55.5      63.3      94.0     116.7     127.1     138.1     146.5     147.4     150.1     153.1
       Mandatory...................................       NA      8.0     13.9     28.8     38.1      50.4      72.0     131.0     168.0     189.2     212.0     227.1     245.5     249.8     263.1
                                                    ------------------------------------------------------------------------------------------------------------------------------------------------
         Total.....................................      7.0     10.9     24.1     49.8     91.4     105.9     135.3     225.0     284.7     316.3     350.1     373.6     392.9     400.0     416.2

    C. Composition:
       Current dollars:............................
         Payments for individuals \1\..............      2.5      3.7      8.7     16.8     32.6      49.3      75.7     141.2     177.1     199.4     222.6     237.9     255.3     261.2     274.6
         Physical capital \1\......................      3.3      5.0      7.1     10.9     22.6      24.9      27.2      39.6      48.7      52.9      56.3      57.5      59.0      60.7      62.1
         Other grants..............................      1.2      2.2      8.3     22.2     36.2      31.6      32.5      44.2      58.9      63.9      71.1      78.3      78.7      78.1      79.5
                                                    ------------------------------------------------------------------------------------------------------------------------------------------------
           Total...................................      7.0     10.9     24.1     49.8     91.4     105.9     135.3     225.0     284.7     316.3     350.1     373.6     392.9     400.0     416.2

       Percentage of total grants:
         Payments for individuals \1\..............    35.3%    34.1%    36.2%    33.6%    35.7%     46.6%     55.9%     62.8%     62.2%     63.1%     63.6%     63.7%     65.0%     65.3%     66.0%
         Physical capital \1\......................    47.3%    45.7%    29.3%    21.9%    24.7%     23.5%     20.1%     17.6%     17.1%     16.7%     16.1%     15.4%     15.0%     15.2%     14.9%
         Other grants..............................    17.4%    20.2%    34.5%    44.5%    39.6%     29.9%     24.0%     19.7%     20.7%     20.2%     20.3%     20.9%     20.0%     19.5%     19.1%
                                                    ------------------------------------------------------------------------------------------------------------------------------------------------
          Total....................................   100.0%   100.0%   100.0%   100.0%   100.0%    100.0%    100.0%    100.0%    100.0%    100.0%    100.0%    100.0%    100.0%    100.0%    100.0%

      Constant (FY 1996) dollars:
        Payments for individuals \1\...............     11.3     15.9     31.7     45.4     60.2      69.7      88.9     144.1     165.0     180.5     196.6     204.7     214.3     213.9     219.5
         Physical capital \1\......................     15.8     22.4     25.2     23.9     36.1      31.8      30.3      40.4      45.5      47.9      49.5      49.2      49.0      49.1      48.8
         Other grants..............................      8.3     12.8     36.1     67.2     72.2      45.5      38.7      45.3      52.1      54.8      59.3      63.4      62.0      59.8      59.2
                                                    ------------------------------------------------------------------------------------------------------------------------------------------------
           Total...................................     35.3     51.2     92.9    136.5    168.5     147.0     157.9     229.8     262.5     283.2     305.4     317.3     325.4     322.8     327.4

    D. Total grants as a percent of:
       Federal outlays:
         Total.....................................     7.6%     9.2%    12.3%    15.0%    15.5%     11.2%     10.8%     14.8%     15.9%     17.0%     17.9%     18.5%     18.9%     18.4%     18.7%
         Domestic programs \2\.....................    18.0%    18.3%    23.2%    21.7%    22.2%     18.2%     17.1%     21.6%     22.0%     22.9%     23.6%     24.0%     24.1%     23.3%     23.3%
       State and local expenditures................    19.2%    20.1%    24.1%    27.1%    30.4%     24.2%     21.0%     25.1%     24.7%       N/A       N/A       N/A       N/A       N/A       N/A
       Gross domestic product......................     1.4%     1.6%     2.4%     3.2%     3.3%      2.6%      2.4%      3.1%      2.9%      3.1%      3.2%      3.3%      3.3%      3.1%      3.1%

    E. As a share of total State and local gross
     investment:
       Federal capital grants......................    24.6%    25.5%    25.4%    25.9%    35.4%     30.2%     21.9%     25.8%     21.4%       N/A       N/A       N/A       N/A       N/A       N/A
      State and local own-source financing.........    75.4%    74.5%    74.6%    74.1%    64.6%     69.8%     78.1%     74.2%     78.6%       N/A       N/A       N/A       N/A       N/A       N/A
                                                    ------------------------------------------------------------------------------------------------------------------------------------------------
         Total.....................................   100.0%   100.0%   100.0%   100.0%   100.0%    100.0%    100.0%    100.0%    100.0%       N/A       N/A       N/A       N/A       N/A       N/A
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    N/A = Not available.
    * 50 million or less.
    \1\ Grants that are both payments for individuals and capital investment are shown under capital investment.
    \2\ Excludes national defense, international affairs, net interest, and undistributed offsetting receipts.

    ments for individuals have grown. In 2002, grants for physical capital
    are estimated to be 16.1 percent of total grants.
       The other grants are primarily for education, training, employment,
    and social services. These grants increased to 44.5 percent of total
    grants by 1975, and are projected to be 20.3 percent of total grants in
    2002.
       Section C of Table 9-2 also shows these three categories in constant
    dollars. In constant 1996 dollars, total grants increase from $157.9
    billion in 1990 to an estimated $305.4 billion in 2002, an average
    increase of 5.7 percent per year. During this same period, grants for
    payments to individuals are estimated to increase an average of 6.8
    percent per year; grants

    [[Page 203]]

    for physical capital an average of 4.2 percent per year, and other
    grants an average of 3.6 percent per year.
       The real growth in grants during the 1990s is in contrast to the
    1980s. During the period between 1980 and 1990, outlays for total grants
    in constant 1996 dollars decreased from $168.5 billion in 1980 to $157.9
    billion in 1990.
       Section D of this table shows grants as a percentage of Federal
    outlays, State and local expenditures, and gross domestic product.
    Grants have increased as a percentage of total Federal outlays from 10.8
    percent in 1990 to an estimated 17.9 percent in 2002. Grants as a
    percentage of domestic spending are estimated to be 23.6 percent in
    2002.
       As a percentage of total State and local expenditures, grants have
    increased from 21.0 percent in 1990 to 24.7 percent in 2000.
       Section E shows the relative contribution of physical capital grants
    in assisting States and localities with gross investment. After a slight
    increase to 25.8 percent in 1995, Federal capital grants have declined
    to be 21.4 percent of State and local gross investment in 2000.

         OTHER INFORMATION ON FEDERAL AID TO STATE AND LOCAL GOVERNMENTS

       Additional information regarding aid to State and local governments
    can be found elsewhere in this budget and in other documents.
       Major public physical capital investment programs providing Federal
    grants to State and local governments are identified in Chapter 6,
    ``Federal Investment Spending and Capital Budgeting.''
       Data for summary and detailed grants to State and local governments
    can be found in many sections of a separate document entitled Historical
    Tables. Section 12 of that document is devoted exclusively to grants to
    State and local governments. Additional information on grants can be
    found in Section 6 (Composition of Federal Government Outlays); Section
    9 (Federal Government Outlays for Investment: Major Physical Capital,
    Research and Development, and Education and Training); Section 11
    (Federal Government Payments for Individuals); and Section 15 (Total
    (Federal and State and Local) Government Finances).
       In addition to these sources, a number of other sources of
    information are available that use slightly different concepts of
    grants, provide State-by-State information, provide information on how
    to apply for Federal aid, or display information about audits.
       Government Finances, published annually by the Bureau of the Census
    in the Department of Commerce, provides data on public finances,
    including Federal aid to State and local governments.
       The Survey of Current Business, published monthly by the Bureau of
    Economic Analysis in the Department of Commerce, provides data on the
    national income and product accounts (NIPA), a broad statistical concept
    encompassing the entire economy. These accounts include data on Federal
    grants to State and local governments. Data using the NIPA concepts
    appear in this volume in Chapter 16, ``National Income and Product
    Accounts.''
       The Budget Information for States (BIS) report provides estimates of
    State-by-State funding allocations for the largest formula grant
    programs for the past, present, and budget year. These programs comprise
    approximately 85 percent of total Federal aid to State and local
    governments. The document is prepared by the Office of Management and
    Budget soon after the Budget is released.
       Federal Aid to States, a report prepared by the Bureau of the Census,
    shows Federal spending by State for grants for the most recently
    completed fiscal year.
       The Consolidated Federal Funds Report is an annual document that
    shows the distribution of Federal spending by State and county areas and
    by local governmental jurisdictions. It is released by the Bureau of the
    Census in the Spring.
       The Federal Assistance Awards Data System (FAADS) provides
    computerized information about current grant funding. Data on all direct
    assistance awards are provided quarterly by the Bureau of the Census to
    the States and to the Congress.
       The Catalog of Federal Domestic Assistance is a primary reference
    source for communities wishing to apply for grants and other domestic
    assistance. The Catalog is prepared by the General Services
    Administration with data collected by the Office of Management and
    Budget and is available from the Government Printing Office. The basic
    edition of the Catalog is usually published in June and an update is
    generally prepared in December. It contains a detailed listing of grant
    and other assistance programs; discussions of eligibility criteria,
    application procedures, and estimated obligations; and related
    information.
       The Federal Audit Clearinghouse maintains an on-line database (http:/
    /harvester.census.gov/sac) that provides access to summary information
    about audits conducted under OMB Circular A-133, ``Audits to States,
    Local Governments, and Non-Profit Organizations.'' Information is
    available for each audited entity, including the amount of Federal money
    expended by program and whether there were audit findings.

                           DETAILED FEDERAL AID TABLE

       Table 9-3, ``Federal Grants to State and Local Governments-Budget
    Authority and Outlays,'' provides detailed budget authority and outlay
    data for grants. This table displays discretionary and mandatory grant
    programs separately.

    [[Page 204]]

                 Table 9-3. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS--BUDGET AUTHORITY AND OUTLAYS
                                                (in millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                Budget Authority                             Outlays
    Function, Category, Agency and ---------------------------------------------------------------------------------
                Program                 2000         2001          2002          2000         2001          2002
                                      Actual      Estimate      Estimate       Actual      Estimate      Estimate
    ----------------------------------------------------------------------------------------------------------------
           NATIONAL DEFENSE
    Discretionary:
      Department of Defense--
       Military:
        Research, Development,
         Test, and Evaluation:
          Research, development,             2             2        2                 2             2             2
           test, and evaluation,
           Army...................
                                   ---------------------------------------------------------------------------------
          Total, discretionary....           2             2        2                 2             2             2
                                   ---------------------------------------------------------------------------------
            Total, national                  2             2        2                 2             2             2
             defense..............
                                   =================================================================================
                ENERGY
    Discretionary:
      Department of Energy:
        Energy Programs:
          Energy conservation.....         169           190      311               124           166           313
                                   ---------------------------------------------------------------------------------
          Total, discretionary....         169           190      311               124           166           313
                                   =================================================================================
    Mandatory:
      Tennessee Valley Authority:
        Tennessee Valley Authority         309           313      328               309           313           328
         fund.....................
                                   ---------------------------------------------------------------------------------
          Total, mandatory........         309           313      328               309           313           328
                                   ---------------------------------------------------------------------------------
            Total, energy.........         478           503      639               433           479           641
                                   =================================================================================
         NATURAL RESOURCES AND
              ENVIRONMENT
    Discretionary:
      Department of Agriculture:
        Natural Resources
         Conservation Service:
          Resource conservation     ...........  ............  ............           1             1   ............
           and development........
          Watershed and flood               44            52       28                66            62            79
           prevention operations..
        Forest Service:
          State and private                100           203      121                98           178           143
           forestry...............
          Management of national    ...........            6        5                 1             6             5
           forest lands for
           subsistence uses.......
      Department of Commerce:
        National Oceanic and
         Atmospheric
         Administration:
          Operations, research,            120           135        5                91           101             3
           and facilities.........
          Pacific coastal salmon            58           110      110                 1           167           110
           recovery...............
      Department of the Interior:
        Office of Surface Mining
         Reclamation and
         Enforcement:
          Regulation and                    61            51       51                54            51            57
           technology.............
          Abandoned mine                   181           196      154               152           153           120
           reclamation fund.......
        Bureau of Reclamation:
          Bureau of Reclamation             12            12        7                10            17             7
           loan subsidy...........
        United States Geological
         Survey:
          Surveys, investigations   ...........            3   ............  ...........            3   ............
           and research...........
        United States Fish and
         Wildlife Service:
          Commercial salmon                  5   ............  ............  ...........            5   ............
           fishery capacity
           reduction..............
          State wildlife grants...  ...........           50   ............  ...........            8            10
          Land acquisition........  ...........  ............      60        ...........  ............           24
          Cooperative endangered            23           105       55                13            27            63
           species conservation
           fund...................
          Wildlife conservation              1             1   ............           1             1   ............
           and appreciation fund..
          Miscellaneous permanent            2             3        3                 2             2             3
           appropriations.........
        National Park Service:
          Urban park and            ...........           29   ............           1             3             6
           recreation fund........
          National recreation and            2   ............  ............           1             1   ............
           preservation...........
          Land acquisition and              43            90      450                 7            51            22
           State assistance.......
          Historic preservation             75            94       37                52           106            74
           fund...................
      Environmental Protection
       Agency:
        State and tribal                 3,446         3,621    3,289             3,192         3,393         3,533
         assistance grants........
        Hazardous substance                287           171      171               240           141           170
         superfund................
        Leaking underground                 59            64       62                58            61            64
         storage tank trust fund..
                                   ---------------------------------------------------------------------------------
          Total, discretionary....       4,519         4,996    4,608             4,041         4,538         4,493
                                   =================================================================================

    [[Page 205]]

    Mandatory:
      Department of the Interior:
        Bureau of Land Management:
          Miscellaneous permanent            7            12       13                 2            12            13
           payment accounts.......
        Minerals Management
         Service:
          National forests fund,             3             5        5                 3             5             5
           Payment to States......
          Leases of lands acquired           1             2        2                 1             2             2
           for flood control,
           navigation, and allied
           purposes...............
        United States Fish and
         Wildlife Service:
          Federal aid in wildlife          226           287      240               232           216           233
           restoration............
          Sport fish restoration..         303           301      352               285           295           311
        Departmental Management:
          Everglades watershed      ...........  ............  ............          25            17   ............
           protection.............
          Everglades restoration             1             2   ............           1             2             2
           account................
      Department of the Treasury:
        Financial Management
         Service:
          Payment to terrestrial             5             5        5                 5             5             5
           wildlife habitat
           restoration trust fund.
                                   ---------------------------------------------------------------------------------
          Total, mandatory........         546           614      617               554           554           571
                                   ---------------------------------------------------------------------------------
            Total, natural               5,065         5,610    5,225             4,595         5,092         5,064
             resources and
             environment..........
                                   =================================================================================
              AGRICULTURE
    Discretionary:
      Department of Agriculture:
        Departmental
         Administration:
          Outreach for socially              3             3        3                 4             3             3
           disadvantaged farmers..
        Cooperative State
         Research, Education, and
         Extension Service:
          Extension activities....         424           433      413               437           421           460
          Research and education           238           268      240               224           265           240
           activities.............
          Integrated activities...          14            15       15        ...........            6            11
        Agricultural Marketing
         Service:
          Payments to States and             1             1        1                 1             1             1
           possessions............
        Farm Service Agency:
          State mediation grants..           3             3        3                 3             2             2
                                   ---------------------------------------------------------------------------------
          Total, discretionary....         683           723      675               669           698           717
                                   =================================================================================
    Mandatory:
      Department of Agriculture:
        Office of the Secretary:
          Fund for rural America..          20            10       15                11             8            11
        Farm Service Agency:
          Commodity Credit                  44           136      109                44           136           109
           Corporation fund.......
                                   ---------------------------------------------------------------------------------
          Total, mandatory........          64           146      124                55           144           120
                                   ---------------------------------------------------------------------------------
            Total, agriculture....         747           869      799               724           842           837
                                   =================================================================================
      COMMERCE AND HOUSING CREDIT
    Mandatory:
      Department of Commerce:
        National Oceanic and
         Atmospheric
         Administration:
          Promote and develop                1             5        5                 3             6             5
           fishery products and
           research pertaining to
           American fisheries.....
                                   ---------------------------------------------------------------------------------
          Total, mandatory........           1             5        5                 3             6             5
                                   ---------------------------------------------------------------------------------
            Total, commerce and              1             5        5                 3             6             5
             housing credit.......
                                   =================================================================================
            TRANSPORTATION
    Discretionary:
      Department of
       Transportation:
        Coast Guard:
          Boat safety.............  ...........  ............  ............           9             1   ............
        Federal Aviation
         Administration:
          Grants-in-aid for              2,799         2,623    2,969             1,578         2,173         2,764
           airports (Airport and
           airway trust fund) \1\.
          Research, engineering             46            48       50                46            48            50
           and development
           (Airport and airway
           trust fund)............

    [[Page 206]]

        Federal Highway
         Administration:
          State infrastructure      ...........  ............  ............          19             8             8
           banks..................
          Appalachian development   ...........  ............  ............         101            79            43
           highway system.........
          Highway-related safety    ...........  ............  ............           1             1   ............
           grants.................
          Appalachian development   ...........          254   ............  ...........           69           104
           highway system (Highway
           trust fund)............
          Federal-aid highways \1\      28,860        33,158   34,098            23,494        25,027        27,194
          Miscellaneous             ...........          605   ............         133           254           320
           appropriations.........
          Miscellaneous highway     ...........        1,182   ............          42           354           510
           trust funds............
        Federal Motor Carrier
         Safety Administration:
          National motor carrier           105           177      205                99           134           185
           safety program \1\.....
          Motor carrier safety \1\  ...........  ............       5        ...........  ............            4
        National Highway Traffic
         Safety Administration:
          Highway traffic safety           197           202      212               181           210           217
           grants \1\.............
        Federal Railroad
         Administration:
          Emergency railroad        ...........  ............  ............           3             4   ............
           rehabilitation and
           repair.................
          Local rail freight        ...........  ............  ............           1   ............  ............
           assistance.............
          Alaska railroad                   15            30   ............          11            52            18
           rehabilitation.........
          Railroad research and              2             3        3                 1             2             2
           development............
          Conrail commuter          ...........  ............  ............           3             3   ............
           transition assistance..
        Federal Transit
         Administration:
          Research, training, and   ...........  ............  ............  ...........            2   ............
           human resources........
          Job access and reverse            75           100      125                17            45            65
           commute grants \1\.....
          Interstate transfer       ...........  ............  ............           1             5             2
           grants-transit.........
          Washington Metropolitan   ...........  ............  ............         109           107            71
           Area Transit Authority.
          Formula grants \1\......       4,641         3,287    3,592             2,792         3,216         3,191
          Capital investment             2,492         2,694    2,841             1,071           961         1,572
           grants \1\.............
          Transit planning and             138            90       90                72            98           114
           research \1\...........
          Discretionary grants      ...........  ............  ............       1,200           983           614
           (Highway trust fund,
           mass transit account)..
        Research and Special
         Programs Administration:
          Pipeline safety.........          15            21       18                13            17            17
                                   ---------------------------------------------------------------------------------
          Total, discretionary \1\      39,385        44,474   44,208            30,997        33,853        37,065
                                   =================================================================================
    Mandatory:
      Department of
       Transportation:
        Federal Highway
         Administration:
          Federal-aid highways....         739           758      739             1,217         1,399         1,248
        Research and Special
         Programs Administration:
          Emergency preparedness            24            13       13                 8            12            13
           grants.................
                                   ---------------------------------------------------------------------------------
          Total, mandatory \1\....         763           771      752             1,225         1,411         1,261
                                   ---------------------------------------------------------------------------------
            Total, transportation.      40,148        45,245   44,960            32,222        35,264        38,326
                                   =================================================================================
        COMMUNITY AND REGIONAL
              DEVELOPMENT
    Discretionary:
      Department of Agriculture:
        Rural Development:
          Rural community                  584           843      596               479           647           602
           advancement program....
        Rural Utilities Service:
          Distance learning and             21            27       27                 7            18            19
           telemedicine program...
        Rural Business--
         Cooperative Service:
          Rural cooperative                  6            31        6                 4             4            25
           development grants.....
        Forest Service:
          Southeast Alaska                  22             5   ............          10             7             7
           economic disaster fund.
      Department of Commerce:
        Economic Development
         Administration:
          Economic development             424           421      335               356           431           428
           assistance programs....
      Department of Housing and
       Urban Development:
        Public and Indian Housing
         Programs:
          Moving to work..........           5   ............  ............  ...........            3   ............
        Community Planning and
         Development:
          Community development          4,809         5,113    4,722             4,955         4,940         5,036
           block grants...........
          Urban development action  ...........  ............  ............          10            10            10
           grants.................
          Community development             30            30       15                 7            20            20
           loan guarantees subsidy
          National cities in                 5   ............  ............           5   ............  ............
           schools community
           development program....

    [[Page 207]]

          Brownfields                       25            25       25                 4            25            30
           redevelopment..........
          Urban empowerment zones.          55           185      150                 7            49            92
        Office of Lead Hazard
         Control:
          Lead hazard reduction...          80           100      110                95            95            95
      Department of the Interior:
        Bureau of Indian Affairs:
          Operation of Indian              174           142      148               119           125           131
           programs...............
          Indian guaranteed loan             5             5        5                 5             9             5
           subsidy................
      Federal Emergency Management
       Agency:
        Emergency management               174           267      255               142           219           254
         planning and assistance..
        Disaster relief...........       2,295         1,115      956             2,234         1,901         2,070
        Disaster assistance for     ...........  ............  ............          50            90            54
         unmet needs..............
        National flood mitigation           20            20       20                13            23            20
         fund.....................
      Appalachian Regional                  59            70       59               125           108           100
       Commission.................
      Delta Regional Authority....  ...........           18       18        ...........            2             5
      Denali Commission...........          20            30       30                38            13            39
                                   ---------------------------------------------------------------------------------
          Total, discretionary....       8,813         8,447    7,477             8,665         8,739         9,042
                                   ---------------------------------------------------------------------------------
            Total, community and         8,813         8,447    7,477             8,665         8,739         9,042
             regional development.
                                   =================================================================================
         EDUCATION, TRAINING,
        EMPLOYMENT, AND SOCIAL
               SERVICES
    Discretionary:
      Department of Commerce:
        National
         Telecommunications and
         Information
         Administration:
          Public                            13            31       31                12            24            26
           telecommunications
           facilities, planning
           and construction.......
          Information                        6            22        5                 8            15            20
           infrastructure grants..
      Department of Education:
        Office of Elementary and
         Secondary Education:
          Reading excellence \2\..          56           277   ............          27           180           234
          Indian education........          75           113      113                64            82           105
          Impact aid..............         901           985    1,122               875         1,121         1,109
          Chicago litigation        ...........  ............  ............           2             2   ............
           settlement.............
          Education reform........         964           611   ............         965         1,234           674
          Education for the              8,667         8,938   10,969             8,511         8,432         9,355
           disadvantaged \2\......
          School improvement             1,357         4,417    6,281             2,394         2,936         3,744
           programs \2\...........
        Office of Bilingual
         Education and Minority
         Languages Affairs:
          Bilingual and immigrant          329           353      460               319           370           351
           education..............
        Office of Special
         Education and
         Rehabilitative Services:
          Special education \2\...       2,036         5,816    8,147             4,696         5,535         6,652
          Rehabilitation services          120           133      173               104           185           161
           and disability research
          American Printing House           10            12       12                 9            15            12
           for the Blind..........
        Office of Vocational and
         Adult Education:
          Vocational and adult             851         1,778    1,771             1,448         1,669         1,731
           education \2\..........
        Office of Postsecondary
         Education:
          Higher education........         281           376      307               152           347           354
        Office of Student
         Financial Assistance:
          Student financial                 40            55       55                24            49            55
           assistance.............
        Office of Educational
         Research and Improvement:
          Education research,              100            56   ............         166           174            61
           statistics, and
           assessment.............
      Department of Health and
       Human Services:
        Administration for
         Children and Families:
          Promoting safe and                 3             3        3                 3             3             3
           stable families........
          Children and families          5,004         7,607    7,832             5,843         6,325         7,480
           services programs \2\..
        Administration on Aging:
          Aging services programs.         933         1,103    1,098               884         1,017         1,086
      Department of the Interior:
        Bureau of Indian Affairs:
          Operation of Indian               51            78      101                50            71           100
           programs...............
      Department of Labor:
        Employment and Training
         Administration:
          Training and employment        2,227         4,065    3,681             2,957         3,641         4,494
           services \2\...........
          Community service                 97            97       97                99           108            97
           employment for older
           Americans..............
          State unemployment               163           193      177               225           165           175
           insurance and
           employment service
           operations.............
          Unemployment trust fund.         962           982      982               961           957           982
      Corporation for National and
       Community Service:
        Domestic volunteer service          71            73       77                70            72            75
         programs, operating
         expenses.................

    [[Page 208]]

        National and community             229           242      218               204           263           230
         service programs,
         operating expenses.......
      Corporation for Public
       Broadcasting:
        Corporation for Public             190           224      230               190           206           217
         Broadcasting.............
      District of Columbia:
        District of Columbia
         General and Special
         Payments:
          Federal payment for               17            17       17                17            17            17
           resident tuition
           support................
      National Endowment for the
       Arts:
        National Endowment for the          34            34       34                31            39            36
         Arts: grants and
         administration...........
        Challenge America arts      ...........            3        3        ...........            1             3
         fund.....................
      Institute of Museum and
       Library Services:
        Office of Museum Services:           6             8        5                 6             6            11
         grants and administration
        Office of Library                  151           175      152               152           155           203
         Services: grants and
         administration...........
                                   ---------------------------------------------------------------------------------
          Total, discretionary \2\      25,944        38,877   44,153            31,468        35,416        39,853
                                   =================================================================================
    Mandatory:
      Department of Education:
        Office of Elementary and
         Secondary Education:
          Reading excellence \2\..  ...........  ............     195        ...........  ............  ............
          Education for the         ...........  ............   6,758        ...........  ............  ............
           disadvantaged \2\......
          School improvement        ...........  ............   1,765        ...........  ............  ............
           programs \2\...........
        Office of Special
         Education and
         Rehabilitative Services:
          Special education \2\...  ...........  ............   5,072        ...........  ............  ............
          Rehabilitation services        2,339         2,400    2,481             2,463         2,196         2,455
           and disability research
        Office of Vocational and
         Adult Education:
          Vocational and adult      ...........  ............     791        ...........  ............  ............
           education \2\..........
      Department of Health and
       Human Services:
        Administration for
         Children and Families:
          Job opportunities and     ...........  ............  ............          15             9             3
           basic skills training
           program................
          Promoting safe and               289           300      495               239           271           316
           stable families........
          Social services block          1,775         1,725    1,700             1,827         1,906         1,809
           grant..................
          Children and families     ...........  ............   1,400        ...........  ............  ............
           services programs \2\..
          Payments to States for         5,697         6,401    6,682             5,453         6,055         6,549
           foster care and
           adoption assistance....
      Department of Labor:
        Employment and Training
         Administration:
          Training and employment   ...........  ............   1,772        ...........  ............  ............
           services \2\...........
          Welfare to work jobs....        -137           -50   ............         527           850           690
          Federal unemployment             132           132      132               133           141           136
           benefits and allowances
                                   ---------------------------------------------------------------------------------
          Total, mandatory \2\....      10,095        10,908   29,243            10,657        11,428        11,958
                                   ---------------------------------------------------------------------------------
            Total, education,           36,039        49,785   73,396            42,125        46,844        51,811
             training, employment,
             and social services..
                                   =================================================================================
                HEALTH
    Discretionary:
      Department of Agriculture:
        Food Safety and Inspection
         Service:
          Salaries and expenses...          43            47       48                43            47            48
      Department of Health and
       Human Services:
        Food and Drug
         Administration:
          Salaries and expenses...           1             1        1                 1             1             1
        Health Resources and
         Services Administration:
          Health resources and           2,028         2,215    2,344             2,028         2,215         2,344
           services...............
        Centers for Disease
         Control and Prevention:
          Disease control,               1,881         2,502    2,497             1,611         2,006         2,386
           research, and training.
        Substance Abuse and Mental
         Health Services
         Administration:
          Substance abuse and            2,012         2,152    2,212             1,931         2,027         2,109
           mental health services.
      Department of Labor:
        Occupational Safety and
         Health Administration:
          Salaries and expenses...          82            88       88                82            88            88
        Mine Safety and Health
         Administration:
          Salaries and expenses...           6             8        8                 6             8             8
                                   ---------------------------------------------------------------------------------
          Total, discretionary....       6,053         7,013    7,198             5,702         6,392         6,984
                                   =================================================================================

    [[Page 209]]

    Mandatory:
      Department of Health and
       Human Services:
        Health Care Financing
         Administration:
          Grants to States for         117,744       128,853   142,423          117,921       128,853       142,423
           medicaid...............
          State children's health        4,259         4,249    3,115             1,220         4,032         3,355
           insurance fund.........
          State grants and          ...........           62       67        ...........           16            29
           demonstrations.........
          Immediate helping hand    ...........        2,500   11,200        ...........        2,500        11,200
           prescription drug plan.
                                   ---------------------------------------------------------------------------------
          Total, mandatory........     122,003       135,664   156,805          119,141       135,401       157,007
                                   ---------------------------------------------------------------------------------
            Total, health.........     128,056       142,677   164,003          124,843       141,793       163,991
                                   =================================================================================
            INCOME SECURITY
    Discretionary:
      Department of Agriculture:
        Food and Nutrition
         Service:
          Food donations programs.         141           151      151               137           150           150
          Commodity assistance             133           140      135               132           138           135
           program................
          Special supplemental           4,032         4,044    4,137             3,950         4,085         4,129
           nutrition program for
           women, infants, and
           children (WIC).........
          Child nutrition programs          14            13        9                 7             7             5
      Department of Health and
       Human Services:
        Administration for
         Children and Families:
          Low income home energy         2,000         1,700    1,700             1,495         2,241         1,525
           assistance.............
          Refugee and entrant              377           324      324               280           326           324
           assistance.............
          Payments to States for         1,178         1,993    2,193             1,065         1,677         2,062
           the child care and
           development block grant
      Department of Housing and
       Urban Development:
        Public and Indian Housing
         Programs:
          Public housing operating       3,138         3,235    3,385             2,836         3,217         3,336
           fund...................
          Drug elimination grants          310           309   ............         288           317           313
           for low-income housing.
          Revitalization of                575           574      574               379           460           552
           severely distressed
           public housing (HOPE
           VI)....................
          Public housing capital         2,884         2,993    2,293             3,690         3,718         3,583
           fund...................
          Native American housing          620           649      649               643           707           669
           block grant............
          Housing certificate fund       3,671         8,099   11,283             8,803         9,092         9,722
           \2\....................
        Community Planning and
         Development:
          Homeless assistance            1,020         1,023    1,023               885         1,000         1,200
           grants.................
          Home investment                1,636         1,796    1,796             1,479         1,736         1,857
           partnership program....
          Youthbuild program......  ...........  ............  ............           1             1   ............
          Housing opportunities            232           257      277               215           216           219
           for persons with AIDS..
          Rural housing and                 25            25   ............           8            24            25
           economic development...
        Housing Programs:
          Congregate services.....  ...........  ............  ............           2   ............  ............
          Homeownership and                -19   ............  ............          25            25            25
           opportunity for people
           everywhere grants (HOPE
           grants)................
          Housing for special              911           996    1,001               720           988         1,025
           populations............
      Department of Labor:
        Employment and Training
         Administration:
          Unemployment trust fund.       2,366         2,364    2,414             2,359         2,364         2,414
      Federal Emergency Management
       Agency:
        Emergency food and shelter         110           140      140               110           140           140
         program..................
                                   ---------------------------------------------------------------------------------
          Total, discretionary \2\      25,354        30,825   33,484            29,509        32,629        33,410
                                   =================================================================================
    Mandatory:
      Department of Agriculture:
        Agricultural Marketing
         Service:
          Funds for strengthening          710           738      710               523           750           639
           markets, income, and
           supply (section 32)....
        Food and Nutrition
         Service:
          Food stamp program......       3,774         3,878    3,806             3,508         3,558         3,752
          Child nutrition programs       9,436         9,466    9,932             9,053         9,748        10,189
      Department of Health and
       Human Services:
        Administration for
         Children and Families:
          Payments to States for         1,010         3,321    3,448             2,906         3,439         3,453
           child support
           enforcement and family
           support programs.......
          Child care entitlement         2,367         2,567    2,717             2,237         2,423         2,555
           to States..............
          Temporary assistance for      16,689        16,689   16,679            15,464        17,080        17,260
           needy families.........
      Department of Housing and
       Urban Development:
        Public and Indian Housing
         Programs:
          Housing certificate fund  ...........  ............   3,057        ...........  ............  ............
           \2\....................
                                   ---------------------------------------------------------------------------------

    [[Page 210]]

          Total, mandatory \2\....      33,986        36,659   40,349            33,691        36,998        37,848
                                   ---------------------------------------------------------------------------------
            Total, income security      59,340        67,484   73,833            63,200        69,627        71,258
                                   =================================================================================
            SOCIAL SECURITY
    Discretionary:
      Social Security
       Administration:
        Federal disability                   6            14       14                 6            14            14
         insurance trust fund.....
                                   ---------------------------------------------------------------------------------
          Total, discretionary....           6            14       14                 6            14            14
                                   ---------------------------------------------------------------------------------
            Total, social security           6            14       14                 6            14            14
                                   =================================================================================
    VETERANS BENEFITS AND SERVICES
    Discretionary:
      Department of Veterans
       Affairs:
        Veterans Health
         Administration:
          Medical care............         318           343      369               318           343           369
        Construction:
          Grants for construction           90           100       50               104            85            91
           of State extended care
           facilities.............
          Grants for the                    25            25       25                12            17            21
           construction of State
           veterans cemeteries....
                                   ---------------------------------------------------------------------------------
          Total, discretionary....         433           468      444               434           445           481
                                   ---------------------------------------------------------------------------------
            Total, veterans                433           468      444               434           445           481
             benefits and services
                                   =================================================================================
       ADMINISTRATION OF JUSTICE
    Discretionary:
      Department of Health and
       Human Services:
        Administration for
         Children and Families:
          Violent crime reduction           92   ............  ............          97            84            29
           programs \3\...........
      Department of Housing and
       Urban Development:
        Fair Housing and Equal
         Opportunity:
          Fair housing activities.          44            46       46                33            37            37
      Department of Justice:
        Office of Justice
         Programs:
          Justice assistance......         151           263      304                65           147           455
          State and local law            1,520         2,767    1,933               475         1,760         3,270
           enforcement assistance.
          Juvenile justice                 242           263      268               177           158           383
           programs...............
          Community oriented               595         1,037      855             1,390         1,210           926
           policing services......
          Violent crime reduction        1,184   ............  ............       2,049   ............  ............
           programs, State and
           local law enforcement
           assistance.............
      Court Services and Offender
       Supervision Agency for the
       District:
        Federal payment to Court            93   ............  ............          66   ............  ............
         Services and Offender
         Supervision Agency for
         the District of Columbia.
      Equal Employment Opportunity
       Commission:
        Salaries and expenses.....          29            30       30                46            42            45
      State Justice Institute:
        State Justice Institute:             7             7        7                 8             7             7
         salaries and expenses....
                                   ---------------------------------------------------------------------------------
          Total, discretionary....       3,957         4,413    3,443             4,406         3,445         5,152
                                   =================================================================================
    Mandatory:
      Department of Justice:
        Legal Activities and U.S.
         Marshals:
          Assets forfeiture fund..         305           240      208               220           275           246
        Office of Justice
         Programs:
          Crime victims fund......         500           509      567               386           657           490
      Department of the Treasury:
        Departmental Offices:
          Treasury forfeiture fund          98            88       88               108            88            88
                                   ---------------------------------------------------------------------------------
          Total, mandatory........         903           837      863               714         1,020           824
                                   ---------------------------------------------------------------------------------
            Total, administration        4,860         5,250    4,306             5,120         4,465         5,976
             of justice...........
                                   =================================================================================

    [[Page 211]]

          GENERAL GOVERNMENT
    Discretionary:
      Department of the Interior:
        Bureau of Land Management:
          Payments in lieu of              134           200      150               133           200           150
           taxes..................
        Insular Affairs:
          Trust Territory of the    ...........  ............  ............           2             2             2
           Pacific Islands........
      District of Columbia:
        District of Columbia
         Courts:
          Federal payment to the           100           105      111                86           107           114
           District of Columbia
           courts.................
          Defender services in              34            34       34                26            39            34
           District of Columbia
           courts.................
          Crime victims             ...........           18   ............  ...........           18   ............
           compensation fund......
        District of Columbia
         Corrections:
          Payment to the District          175           134       33               158           144            43
           of Columbia corrections
           trustee, operations....
        District of Columbia
         General and Special
         Payments:
          Federal support for               34            43   ............          83            43   ............
           economic development
           and management reforms
           in the District........
      Federal Drug Control
       Programs:
        High-intensity drug                158           172      206               143           161           223
         trafficking areas program
                                   ---------------------------------------------------------------------------------
          Total, discretionary....         635           706      534               631           714           566
                                   =================================================================================
    Mandatory:
      Department of Agriculture:
        Forest Service:
          Forest Service permanent         213           227      393               213           227           393
           appropriations.........
      Department of Energy:
        Energy Programs:
          Payments to States under           3             3        3                 3             3             3
           Federal Power Act......
      Department of the Interior:
        Bureau of Land Management:
          Miscellaneous permanent          104             8      120               105             8           114
           payment accounts.......
        Minerals Management
         Service:
          Mineral leasing and              691         1,094      983               691         1,094           983
           associated payments....
        United States Fish and
         Wildlife Service:
          National wildlife refuge          19            18       18                19            18            18
           fund...................
        Insular Affairs:
          Assistance to                     70            78       69                74            66            77
           territories............
          Payments to the United           148           104      104               147           104           104
           States territories,
           fiscal assistance......
      Department of the Treasury:
        Bureau of Alcohol, Tobacco
         and Firearms:
          Internal revenue                 297           315      246               297           315           246
           collections for Puerto
           Rico...................
        United States Customs
         Service:
          Refunds, transfers, and           90            96      101                90            96           101
           expenses of operation,
           Puerto Rico............
      Corps of Engineers:
        Permanent appropriations..           9             8        8                17             8             8
                                   ---------------------------------------------------------------------------------
          Total, mandatory........       1,644         1,951    2,045             1,656         1,939         2,047
                                   ---------------------------------------------------------------------------------
            Total, general               2,279         2,657    2,579             2,287         2,653         2,613
             government...........
                                   =================================================================================
              Total, Grants.......     286,267       329,016   377,682          284,659       316,265       350,061
                Discretionary \1\      115,953       141,148   146,551          116,654       127,051       138,092
                 \2\..............
                Mandatory \1\ \2\.     170,314       187,868   231,131          168,005       189,214       211,969
    ----------------------------------------------------------------------------------------------------------------
    \1\ Budget authority for certain transportation programs is classified as mandatory in other budget
      presentations.
    \2\ The Administration proposes to reverse the misleading budget practice of using advance appropriations simply
      to avoid spending limitations. In order to avoid overstating discretionary budget authority in 2002, language
      is proposed to designate the advance appropriation budget authority, appropriated in 2001, as direct
      (mandatory) spending.
    \3\ Amounts for 2001 and 2002 are part of the children and families services programs in the Department of
      Health and Human Services.