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Tuesday, June 25, 2013

Federal Grants to State and Local Governments: An Historical Perspective on Contemporary Issues

Robert Jay Dilger
Senior Specialist in American National Government

The federal government is expected to provide state and local governments more than $560 billion in federal grants in FY2013, funding a wide range of public policies, such as health care, transportation, income security, education, job training, social services, community development, and environmental protection. Federal grants account for about one-third of total state government funding, and more than half of state government funding for health care and public assistance.

Congressional interest in federal grants to state and local governments has always been high given the central role Congress has in determining the scope and nature of the federal grant-in-aid system, the amount of funding involved, and disagreements over the appropriate role of the federal government in domestic policy generally and in its relationship with state and local governments.

Federalism scholars agree that congressional decisions concerning the scope and nature of the federal grants-in-aid system are influenced by both internal and external factors. Internal factors include congressional party leadership and congressional procedures; the decentralized nature of the committee system; the backgrounds, personalities, and ideological preferences of individual Members; and the customs and traditions (norms) that govern congressional behavior. Major external factors include input provided by voter constituencies, organized interest groups, the President, and executive branch officials. Although not directly involved in the legislative process, the Supreme Court, through its rulings on federalism issues, also influences congressional decisions concerning the federal grants-in-aid system.

Overarching all of these factors is the evolving nature of cultural norms and expectations concerning government’s role in American society. Over time, the American public has become increasingly accepting of government activism in domestic affairs generally, and of federal government activism in particular. Federalism scholars attribute this increased acceptance of, and sometimes demand for, government action as a reaction to the industrialization and urbanization of American society, technological innovations in communications which have raised awareness of societal problems, and exponential growth in economic interdependencies brought about by an increasingly global economy.

This report provides an historical synopsis of the evolving nature of the federal grants-in-aid system, focusing on the role Congress has played in defining the system’s scope and nature. It begins with an overview of the contemporary federal grants-in-aid system and then examines its evolution over time, focusing on the internal and external factors that have influenced congressional decisions concerning the system’s development. It concludes with an assessment of the scope and nature of the contemporary federal grants-in-aid system and raises several issues for congressional consideration, including possible ways to augment congressional capacity to provide effective oversight of this system.

Date of Report: June 12, 2013
Number of Pages: 43
Order Number: R40638
Price: $29.95

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