A Refresher on Federal Grants: How They Work and

Why It Matters

HSFO Annual ConferenceColumbus, OHJuly 28, 2013

Federal Funds Information for States www.ffis.org

Where the money goes: pieces of the federal budget pie

Composition of Federal Outlays in FY 2012($ in Billions, % of Total)

Flow of federal funds traceable to states

Payments for individuals have come to dominate federal grants

0

2

4

6

8

10

12

14

16

18

20

1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Federal Outlays for S/L Grants as a Share of Total Federal Outlays

Total Individuals Capital Remainder

What programs areas are supported by state/local grants?

Federal Outlays to State and Local Governments, FY 2012($ in Billions, % of Total)

What are the major health and human services grants?

Types of Grants

Mandatory

Capped Uncapped

Direct Appropriation

Annual Appropriation

Discretionary

Block Grant

Formula Grant

Categorical Grant

Formula Grant Project Grant

What is the key difference between mandatory and discretionary spending?

Mandatory Spending– Spending isn’t determined by annual appropriations – Spending dictated in authorizing legislation

Discretionary Spending– Spending is determined through annual

appropriations process

Mandatory vs. discretionary health and human services grants to states

How do discretionary programs work?

Two-step process to receive funding– Program is created through enactment of authorizing

legislation Specifies maximum amount or “such sums as may be

necessary”– Program funded through appropriations process

Some authorized programs not funded Many programs funded but lack current authorization

– Examples: Child Care Development Block Grant , Community Services Block Grant, Refugee Assistance, LIHEAP

What are the major types of discretionary grants?

Block Grants: fixed funding for general purposes, allocated to states by formula

Categorical Grants: specific, narrowly defined purpose– Formula grants

Noncompetitive awards based on predetermined formula Amount allocated depends on various factors (i.e. population, per

capita income)– Project grants

Generally awarded through a competitive process Fixed project periods/delivery of specific services Cooperative agreement (substantial federal involvement)

Composition of select discretionary programs

Discretionary: Example Programs

Program

Block Grant Categorical Grant

Matching/ MOEFormula Grant Formula Grant Project Grant

Substance Abuse Block Grant X X (MOE)

Mental Health Block Grant X X (MOE)

Maternal & Child Health Block Grant X X (both)

Community Health Centers X X (matching)

Preventive Health Block Grant X

Ryan White HIV/AIDS X X X (both)

Head Start X X (matching)

Child Welfare Services X X (matching)

Community Services Block Grant X

Child Care and Development Block Grant X

LIHEAP X

Refugee Assistance X X X (Matching)

How do mandatory programs work?

Most mandatory spending is in the form of “entitlement” spending– Federal government legally obligated to make payments

to eligible entities Uncapped entitlements: Total spending is determined by number

of eligible beneficiaries and authorized benefit payments (Medicaid, SNAP)

Capped entitlements: Spending capped at specific level provided in authorizing law (SSBG, CHIP)

Examples of other mandatory spending– Some funding included in health care reform

How do mandatory programs work?

Mandatory programs are funded by either direct appropriations in authorizing law or annual appropriations– Most mandatory spending bypasses the appropriations

process altogether– Mandatory spending included in annual appropriations

acts is determined by authorizing statute, not the appropriations process

Some mandatory programs are block grants

How do mandatory programs work?

Legislative changes to entitlement spending can be done through authorizing bills or reconciliation– Reconciliation instructions are included in the budget

resolution and considered under special procedures Various statutory/procedural controls on

entitlement spending – Additional mandatory spending must be offset

Composition of select mandatory programs

Mandatory: Example Programs

Program Capped UncappedBlock Grant

Authorized for set period Appropriated

Matching or MOE

Medicaid X X X

CHIP X X X

TANF X X X X

Child Care Entitlements X X X

SSBG X X X

Foster Care/Adoption Assistance X X X

Independent Living X X X

Child Support X X X

Promoting Safe and Stable Families X X X X

Prevention and Public Health Fund X X X

Vaccines for Children X X

SNAP Admin X X X X

Child Nutrition X X X X

Example: Health Care Reform

Mandatory Funding Amended uncapped entitlements (Medicaid) Reauthorized capped entitlements (CHIP) Directly appropriated funding for new and existing programsDiscretionary Funding Extended authorization of existing programs Authorized new programs that must receive annual approp.

– Creative funding mechanisms (Prevention and Public Health Fund, initial direct appropriations)

Why does the type of funding matter?

Most mandatory programs are exempt from sequestration and across-the-board the cuts included in appropriations bills.

Mandatory programs continue during a government shutdown (as long as their authorization is current).

Funding for discretionary programs determined by Congress on an annual basis.

Mandatory programs require an authorization to operate; discretionary programs can continue without an authorization.

Current issues and themes dominating federal grants

Failure of Congress to reauthorize programs– Major mandatory programs operating under program extensions– Discretionary programs operating without authorization

Increased reliance on appropriations process to modify programs

– Program set-asides, demonstration projects

Introduction of competitive elements to current and proposed grants

Increased focus on program outcomes/program integrity Trend toward program consolidation Continued focus on reforming mandatory programs

Useful grant resources

GAO glossary of budget terms: http://www.gao.gov/new.items/d05734sp.pdf

FFIS links: http://www.ffis.org/node/3160 Congressional Research Service (CRS) Reports

– Federal Grants-in-Aid Administration: A primerhttp://www.fas.org/sgp/crs/misc/R42769.pdf

– Entitlements and Appropriated Entitlements http://www.fas.org/sgp/crs/misc/RS20129.pdf

– Introduction to the Federal Budget Processhttp://www.fas.org/sgp/crs/misc/98-721.pdf

Catalog of Federal Domestic Assistance (CFDA.gov)

The End: Questions?

Contact information: Trinity Tomsic202-624-8577, ttomsic@ffis.org