Categorical grants include almost all activities in the national grant-in-aid system, both in regard to the number of software and the whole quantity of the financing. Categorical grants derive their name from the fact that their uses are restricted to a narrowly defined group of activities that normally are described in the authorizing legislation.

Formula grants are distributed to authorities eligible for capital from the authorizing statute on the premise of a numerical formula that takes into account the relative significance of the receiver authority when compared with other entitlement authorities. Examples of formula components include poverty, per capita income, unemployment, enrollment in public schools, and the like.

Understand Categorical Grants

Formula-project categorical grants require a two-stage grant supply: a formula grant is used to apportion capital one of the states, then project grants are given by country officials to state and local government agencies.

Under open-ended settlement grants, the federal government claims to repay a certain proportion of local and state program costs for a prescribed activity or set of actions. Consequently, the entire amount of the federal grant is open-ended and decided on the sum of spending incurred by local and state governments –the larger a country spends, the larger its federal grant.

Medicaid is a fantastic illustration of an impending settlement grant, with a state’s grant depending on its own federal settlement speed (which varies by a minimum of 50 percent in several countries to a maximum of 77 percent in Mississippi) and the amount of a country’s paying to get Medicaid-eligible services.

The origins of federal categorical grants could be tracked in the Morrill Act of 1862, where Congress authorized the distribution of lands to state authorities and instructed the states to use the proceeds from the sale of the land to promote institutions of higher education (i.e., the”land grant” universities).

This aid also has an additional requirement–the universities and schools which received help were required to present army education. States have to submit yearly reports to Congress on program expenses.

The Federal-Aid Highway Act of 1916 was another development milestone in the growth of the national grant system. This app was the federal government’s earliest large-scale help program and also expanded the federal role by establishing several controls and requirements (e.g., job programs, progress reports, cost audits, and project closeout) designed to make sure that state authorities stuck to national targets and objectives within their use of grant financing.

The most expansive period of expansion for categorical grants happened during the 1960’s in response to President Johnson’s call for a Great Society. From the close of the decade, the amount of grant applications had increased from approximately 150 to almost 400, funding more than doubled, along with the national government became a substantial participant in many policy areas in which it had no previous participation.

Through consecutive waves of New Federalism through the Nixon and Reagan administrations sought to consolidate dozens of categorical grant programs into a few block grants, the increase of categorical programs continued. These days, there are roughly 600 grant-in-aid programs, and categorical grants accounts for approximately 95 percent of these programs and over 80 percent of overall grant outlays.

The most essential truth about categorical grants is their extensive variability. Though on the surface which the appearance characteristics of categorical grants may seem to be technical issues, the decisions made regarding the substantial design elements of a categorical grant program are political ones and reflect the relative equilibrium of power and influence among national, state, and local governments.