Federal Aid: Revising Poverty Statistics Affects Fairness of Allocation
Formulas (Letter Report, 05/20/94, GAO/HEHS-94-165).

Concerns have been raised in Congress that revising counts of people in
poverty by adjusting the official poverty line for geographic
differences in the cost of living could significantly alter the
allocation of federal aid to state and local governments. This report
presents GAO's views on how such a revision could affect the fairness of
the distribution of federal formula grants if such an adjustment were
made.  GAO concludes that adjusting poverty counts to reflect
differences in the cost of living, if proven feasible, would bolster the
federal government's ability to target federal aid to places with the
greatest needs.  GAO also believes that such a change should not be
implemented in federal allocation formulas without first assessing the
impact of the change on the fairness with which federal funding is
allocated to states and localities. In a formula lacking an indicator of
states' own funding capabilities, such a change by itself could increase
inequities.  In formulas that already adequately reflect states' funding
capabilities, such a change would improve fairness.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-94-165
     TITLE:  Federal Aid: Revising Poverty Statistics Affects Fairness 
             of Allocation Formulas
      DATE:  05/20/94
   SUBJECT:  Disadvantaged persons
             Grants to states
             State-administered programs
             Population statistics
             Federal aid to states
             Income statistics
             Entitlement programs
             Federal/state relations
             Economically depressed areas
             Cost of living
IDENTIFIER:  Medicaid Program
             Aid to Families with Dependent Children Program
             Hill-Burton Hospital Construction Program
             Vocational Education and Alcohol, Drug Abuse and Mental 
             Health Block Grant
             AFDC
             
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