Categorical grants include nearly all activity in the federal grant-in-aid system, both in respect to the number of software and the whole amount of financing. Categorical grants derive their name from the fact that their uses are confined to a narrowly defined set of actions that normally are defined in the authorizing legislation.
Formula grants are distributed to authorities entitled to capital from the authorizing statute on the premise of a numerical formula which takes into account the relative importance of the recipient jurisdiction when compared with other entitlement government. Examples of formulation components include population, poverty, per capita income, unemployment, enrollment in public schools, and the like. The formula variables and the weight assigned to all are prescribed in the authorizing legislation or determined by administrative officials.
Understand Categorical Grants
Formula-project categorical grants demand a two-stage grant supply: a formula grant is used to apportion capital among the states, then project grants are awarded by state officials to state and local government agencies.
Under open-ended settlement grants, the federal government claims to repay a certain percentage of state and local program costs for a prescribed activity or set of actions. Consequently, the entire amount of the national grant is open-ended and decided on the sum of spending incurred by local and state authorities –the greater a country spends, the bigger its national grant.
Medicaid is a good illustration of an open-ended reimbursement grant, with a state’s grant determined by its federal settlement rate (which changes by a minimum of 50 percent in many nations to a maximum of 77 percent in Mississippi) and the amount of a nation’s paying for Medicaid-eligible services.
The origins of national categorical grants can be tracked into the Morrill Act of 1862, in which Congress authorized the supply of lands to state governments and instructed the states to use the profits from the sale of that land to promote institutions of higher education (i.e., the”land grant” universities).
This aid also has an additional requirement–the schools and universities that received help were required to present military education. States were required to submit annual reports to Congress on program expenditures.
The Federal-Aid Highway Act of 1916 was the next development milestone in the growth of the federal grant system. This program was the federal government’s first large-scale help program and also expanded the federal role by establishing several requirements and controls (e.g., job applications, progress reports, cost audits, and project closeout) designed to make sure that state authorities stuck to national goals and objectives within their use of grant funding.
The most expansive period of growth for categorical grants happened during the 1960’s in response to President Johnson’s call for a Great Society. From the end of the decade, the number of grant applications had increased from approximately 150 to almost 400, funding more than doubled, and the national government became a substantial participant in several policy areas in which it had no previous participation.
Through consecutive waves of New Federalism throughout the Nixon and Reagan administrations sought to consolidate dozens of categorical grant programs into a small number of block grants, the increase of categorical programs lasted. Nowadays, there are approximately 600 grant-in-aid apps, and categorical grants account for approximately 95 percent of those apps and over 80 percent of overall grant outlays.
The most important truth about categorical grants is their extensive variability. Though on the surface that the look characteristics of categorical grants might appear to be technical difficulties, the decisions made concerning the significant design elements of a categorical grant program are political ones and reflect the relative equilibrium of power and influence among national, state, and local authorities.