Over the years—most often during periods of federal budget retrenchment—analysts have considered whether the federal government and states should “swap” responsibilities. That is, whether the federal government should reduce or eliminate its grants in one program area, and redirect those resources into another. Such sorting out holds the promise of allowing the entity with full funding responsibility over an area to improve its efficiency and effectiveness. For states, it could provide flexibility that federal oversight typically precludes, and reduce or eliminate costly and often-burdensome requirements that accompany most federal assistance.
During the Reagan administration, it was suggested that states assume full funding responsibility for the major welfare program (Aid to Families with Dependent Children) while the federal government would take full responsibility for Medicaid. In retrospect, this would have been an excellent deal for states, but it never gained traction.
We are now in another period of federal budget retrenchment. Due to efforts to reduce the federal budget deficit, most federal grant programs outside those designated as “mandatory” have seen level funding at best, and sometimes significant reductions, especially in inflation-adjusted terms. The prospect of swapping greater federal responsibility in one program area for greater state responsibility in another is gaining renewed interest.
To understand the potential impact of federal-state responsibility swaps, it is necessary to consider the importance of federal funding in each of the major categories of public spending. This Special Analysis examines the major areas of state-federal fiscal relations, and provides background information on states’ reliance on federal funds in a host of program areas.
A state that chooses to create a grants office typically does so with the primary goals of managing and maximizing federal grant funds. While these are important objectives, the benefits of a grants office extend beyond these dollar-driven missions.
grants office can ensure that the state’s policy goals are understood by
state agency personnel who are best-positioned to pursue grant funds to
help meet those goals.
state agency staff, there will be a place to turn when federal and state
auditors ask compliance questions related to federal grants. Compliance
rules are complicated, and in 2014 all administrative circulars are being
replaced by new guidance. Even experts will have to update their grants
grants office can give local governments and nonprofits a single place to
go to identify grant opportunities from all funding sources, and to
receive technical assistance.
governments, nonprofits, and others can work with a grants expert in each
state agency who can provide subject-specific advice. They can also
identify people in their own communities already working in the grants
field who are potential partners or resources for technical assistance.
grants office can provide free training for anyone, not just staff in
state agencies, on how to find, win, and manage grants. By providing this
training, peer interaction will increase across agency and jurisdictional
lines, further improving the odds of program success.
and legislative staff can benefit by having a place to direct constituents
seeking advice on where to look for funding.
- A grants
office creates a pool of experts across state agencies to tap when a new
priority requires significant grant writing (e.g., Affordable Care Act
[ACA]) or grants management services (e.g., American Recovery and
Reinvestment Act [ARRA]).
- A grants office can be part of a system for reviewing requests for letters of support on grant applications.
Under the Budget Control Act of 2011 (BCA, P.L. 112-25) and subsequent legislation, mandatory programs covered by sequestration are subject to across-the-board (ATB) cuts in FYs 2013-2023. While a majority of mandatory funding awarded to states is exempt from sequestration, there are a number of mandatory programs that are subject to the ATB cuts. Specifically, 24 grants tracked by FFIS in its Grants Database fall into this category. This Special Analysis provides background on mandatory sequestration and highlights the different approaches taken by federal agencies to implement it.
Per capita federal spending is one measure for states to assess how they fare in their fiscal relationship with the federal government. This analysis provides the most recent per capita figures, focusing on the 242 federal grant-in-aid programs tracked and included in FFIS’s Grants Database. These grants account for 90% of total federal grants to state and local governments. The database primarily includes formula grants and does not capture many of the small competitive grants for which states compete.
This analysis provides per capita data for federal fiscal year (FY) 2013, using the Census Bureau’s annual population estimates from July 2013. On average, the federal government spent $1,871 per person on grants to state and local governments, ranging from $4,815 in the District of Columbia to $1,187 in Nevada.
Many states are seeking ways to assess how they fare in their fiscal relationship with the federal government and strengthen their efforts to maximize federal dollars. A handful of states have set up centralized grant offices to measure their progress and identify new funding opportunities. Others are evaluating whether to do so or have decided to track and monitor federal funds through existing structures.
There are a number of ways to evaluate federal spending. To give states a sense of their standing, the table below shows per capita federal spending for grants tracked by FFIS. While FFIS does not track every grant dollar going to state and local governments, it captures more than 90% of the total. This Special Analysis examines existing data sources and identifies steps to maximizing federal grants.
Many observers believed that the sequestration provisions of the Budget Control Act (BCA) were so unpopular that Congress would replace it with an alternative that included more significant savings from mandatory programs and changes to tax policy. That has proven impossible thus far, and so the BCA currently governs the annual appropriations process. However, neither chamber of Congress has adhered to its provisions in its FY 2014 budget actions. Specifically, both the president and the Senate assume that sequestration is replaced, while the House retains sequestration but violates the specified caps for defense and nondefense spending in order to provide additional defense spending.
FFIS has put out so many updates and re-estimates of our grants database that some of our readers may now be more confused than enlightened. We hope this helps to clarify things:
- OMB has released the final sequestration percentages: -5.0% for nondefense discretionary programs and -5.1% for nondefense mandatory programs subject to the BCA sequester. These cuts are applied to annualized fiscal year (FY) 2013 funding levels in place on March 1, 2013. Federal agencies charged with implementing this sequester will proceed in different ways and have been advised to work with their state partners to let states know how the cuts will affect specific grant programs. FFIS has estimated these fiscal impacts, and the estimates can be viewed here.
- Assuming the current continuing resolution (CR), which expires on March 27, 2013 is extended for the rest of FY 2013 with no changes to any funding levels, a second, much smaller sequester will be triggered. FFIS has described the reasons for the second sequester here.
- FFIS has also estimated the fiscal impact of the second sequester, were one to occur, available at the same link as provided in #1.
- This week, the House passed a CR to fund programs for the remainder of FY 2013. This CR does not extend all current spending levels; instead it funds most programs at their FY 2012 levels but amends some spending levels and includes a small across-the-board (ATB) cut. This ATB cut would negate the need for a second sequester, although the House action has NO impact on the March 1 sequester. FFIS has not prepared any state-by-state estimates reflecting the House CR because the bill is not law; it now moves to the Senate. FFIS has estimated national totals for major grant programs under the House CR. They can be seen here.
- The Senate is taking up the House CR for the remainder of FY 2013 next week. It is expected to amend the House CR. Assuming the Senate passes a CR that varies in any way from what the House passed (and it almost certainly will), the two bills will have to go to conference committee to work out those differences prior to March 27. Only the passage of that second CR will allow a definitive state-by-state estimation of the final spending levels provided for grant programs in FY 2013.
As more questions over the upcoming sequester have surfaced, we have updated our frequently asked questions (FAQs) to include these new questions and provide additional details to some of our previous answers. All new or updated FAQs are indicated in the document.
The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240) postpones the Budget Control Act (BCA) sequester from January 2, 2013 to March 1, 2013. The new law also reduces the total FY 2013 across-the-board (ATB) cut by $24 billion because it includes offsets to pay for the two-month delay.
FFIS has updated its state-by-state estimates of potential spending reductions resulting from the sequester to reflect these changes. FFIS estimates that states could see a -$4.4 billion funding reduction in FY 2013 for the programs in the FFIS database that are subject to sequester. However, most of the funding states receive via federal grants (82%) would be exempt from sequester.