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In a fiscal federal form of government, a block grant is a large sum of money granted by the national government to a regional government with only general provisions as to the way it is to be spent. This can be contrasted with a categorical grant which has more strict and specific provisions on the way it is to be spent.
An advantage of block grants is that they allow regional governments to experiment with different ways of spending money with the same goal in mind, but it is very difficult to compare the results of such spending and reach a conclusion. A disadvantage is that the regional governments might be able to use the money if they collected it through their own taxation systems in order to spend it without any restrictions from above.
Since the 1970s, the United States government has provided large sums of money through block grants, under a policy that has come to be known as "devolutionary" or "new federalism." Block grants replaced the previous policy of revenue sharing (1972–87).
According to the General Accounting Office, from 1980 to 2001 the number of federal block grant programs went from 450 to 700. The grants are aimed at a wide range of activities from education to healthcare, transportation, housing and counterterrorism.
In the United States, the formulas for how much money states receive favors small states. Most grant programs have a minimum amount per state, usually 0.5% or 0.75% of the total money given to states in the program.
For instance, in 2003, under the State Homeland Security Grant Programs and Critical Infrastructure Protection Grants, Wyoming, the least populous state, received $17.5 million and California, the most populous state, received $164 million. In fiscal year 2004 Wyoming is guaranteed to receive a minimum of $15 million and California, the most populated state, $133 million. Wyoming receives $35.3 per person and California receives $4.7 per person.
Similar patterns exist for other block grant formulas. An analysis exists in the book Sizing Up the Senate.
Since devolution in the United Kingdom was implemented in the late 1990s, creating the Scottish Parliament, Welsh Assembly and the Northern Ireland Assembly, the devolved governments of Scotland, Wales and Northern Ireland have been funded by block grants from the government of the United Kingdom. This is because only a relatively small percentage of the tax revenue is collected by the devolved governments. Under the terms of the Scotland Act 2012, the block grant from the UK government to Scotland will be cut, but the Scottish Government will be able to collect an equivalent amount of income tax.
- The award process can be manipulated so that grants can be distributed to reward the federal administration's own party (by favoring states with governors of that party, for example).
- At the local level, the same sort of partisan favoritism may occur when the state distributes the funds to local government units.
- Disbursing the funds through state or local governments makes federal oversight of their proper use very difficult.
- Black, Andrew (30 November 2010). "Q&A: Scotland Bill". BBC News. BBC. Retrieved 14 April 2014.
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