Categorical grants include the majority of activity in the national grant-in-aid system, both in regard to the number of applications and the total amount of financing. Categorical grants derive their name from the fact that their uses are limited to a narrowly defined group of actions that normally are defined in the authorizing legislation.
There are four distinct kinds of categorical grants: formula grants, project grants, formula-project grants, and open-ended reimbursement grants. Formula grants are distributed to jurisdictions entitled to capital from the authorizing statute on the grounds of a numerical formula that takes into consideration the relative need of the recipient authority when compared with other entitlement authorities. Examples of formulation components include population, poverty, per capita income, unemployment, enrollment in public schools, and the like. The formula factors and the weight assigned to each are either prescribed in the authorizing legislation or decided by administrative officials.
Understand Categorical Grants
Formula-project categorical grants demand a two-stage grant distribution: first, a formula grant is used to apportion capital among the nations, and then project grants are awarded by state officials to local and state 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. Therefore, the total quantity of the federal grant is open-ended and determined on the amount of spending incurred by state and local jurisdictions–the more a country spends, the bigger its federal grant. Medicaid is a good illustration of an open-ended reimbursement grant, with a state’s grant determined by its federal reimbursement rate (which varies by a minimum of 50 percent in many nations to a maximum of 77 percent in Mississippi) and the sum of a state’s spending for Medicaid-eligible services.
The origins of national categorical grants can be tracked to the Morrill Act of 1862, in which Congress authorized the supply of lands to say governments and instructed the states to utilize the profits from the sale of that property to encourage institutions of higher education (i.e., the”land grant” universities). This aid also came with an additional requirement–the colleges and universities that received help were needed to present military instruction. States were also required to submit yearly reports to Congress on program expenditures.
The Federal-Aid Highway Act of 1916 was the next development milestone in the evolution of the national grant system. This program was the national government’s first large-scale aid program and also expanded the federal role by establishing several requirements and controls (e.g., job applications, progress reports, expenditure audits, and project closeout) designed to ensure that state governments adhered to national goals and objectives within their use of grant funds.
The most expansive period of growth for categorical grants occurred during the 1960’s in response to President Johnson’s call for a Great Society. By the close of the decade, the number of grant programs had increased from about 150 to nearly 400, funds more than doubled, and the federal government became a significant participant in many policy areas where it had no prior participation.
Through successive waves of New Federalism during the Nixon and Reagan administrations sought to consolidate dozens of categorical grant programs into a small number of block grants, the growth of categorical programs continued. Today, there are about 600 grant-in-aid apps, and categorical grants account for approximately 95 percent of the apps and more than 80 percent of overall grant outlays.
The most crucial fact about categorical grants is their extensive variability. Though on the surface that the look characteristics of categorical grants may seem to be technical problems, the choices made regarding the important design elements of a categorical grant program are political ones and reflect the relative balance of power and influence among federal, state, and local governments.
