United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office Accounting and Information Management Division author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 1996-12-18 monographic deposited born digital 92 p. GA 1.13:AIMD-97-7 https://www.govinfo.gov/app/details/GAOREPORTS-AIMD-97-7 P0b002ee1803715d3 f:ai97007 DGPO 2010-08-12 2011-03-24 GAOREPORTS-AIMD-97-7 machine generated eng fdlp REPORT GAOREPORTS-AIMD-97-7 AIMD-97-7 Economic analysis Block grants Grants-in-aid Intergovernmental fiscal relations Grant administration Grants to states State-administered programs Community Development Block Grant Maternal and Child Health Block Grant Medicaid Program General Revenue Sharing Program Letter Report AIMD Pursuant to a congressional request, GAO examined the federal grant-in-aid system from the perspective of fiscal impact, focusing on the extent to which the federal grant system succeeds in: (1) encouraging states to use federal dollars to supplement rather than replace their own spending on nationally important activities; and (2) targeting grant funding to states with relatively greater programmatic needs and fewer fiscal resources.<p/>GAO found that: (1) for the most part, the federal grant system does not encourage states to use federal dollars as a supplement rather than a replacement for their own spending on nationally important activities, nor is every grant intended to do so; (2) GAO's review and analysis of economists' most recent estimates of substitution suggests that every additional federal grant dollar results in less than a dollar of total additional spending on the aided activity; (3) about 60 cents of every federal grant dollar substitutes for state funds that states otherwise would have spent; (4) part of the fiscal impact of these transfers is to free up a portion of state funds for other state programs or tax relief; (5) GAO's analysis indicated that federal aid is not targeted to offset these fiscal imbalances; (6) a majority of the 87 largest grant programs did not include features, such as state maintenance-of-effort and matching requirements, that can encourage states to use grant dollars as a supplement rather than a replacement for their own spending; (7) most grant formulas do not allocate funds using a combination of the three factors that GAO reported can improve grant targeting, including programmatic needs, fiscal capacity, and service costs; (8) if reducing substitution is a desired goal, Congress could add or strengthen matching and maintenance-of-effort provisons for grant programs; (9) if targeting fiscal relief to states with greater fiscal stress is a desired goal, grant formulas could be changed to include a combination of factors that allocate a larger share of federal aid to those states with relatively greater program needs and fewer resources; and (10) in redesigning grants, Congress would need to consider how best to balance any increase in federal grant restrictions needed to reduce substitution against the decreases in state budgetary flexibility and discretion that might result. https://www.govinfo.gov/content/pkg/GAOREPORTS-AIMD-97-7/html/GAOREPORTS-AIMD-97-7.htm https://www.govinfo.gov/content/pkg/GAOREPORTS-AIMD-97-7/pdf/GAOREPORTS-AIMD-97-7.pdf GAO/AIMD-97-7 https://www.govinfo.gov/app/details/GAOREPORTS-AIMD-97-7 Letter Report GAO/AIMD-97-7; Federal Grants: Design Improvements Could Help Federal Resources Go Further; Economic analysis Block grants Grants-in-aid Intergovernmental fiscal relations Grant administration Grants to states State-administered programs Community Development Block Grant Maternal and Child Health Block Grant Medicaid Program General Revenue Sharing Program Public Law 104-146