Every term the federal government provides grants to local and state governments. Those funds are accounted for federal outlays and a quarter of spending by local and state governments. Over the past years the intergovernmental grants from federal government that support state and local government that supports state and local programs have fluctuated. These financial transfers fluctuate impacting local and state government and these funds are narrowed which do not met budget items.
The paper summarizes about the funds provided to local governments and the programs they adopt to utilize the funds which are provided by the federal government. The fluctuation occurs because the revenues increase or decrease depending on economic performances. Research question: What are the implications of fluctuations when spending grants to the local government and how the federal government grant money to the local and state government? Research objective: To determine the parameters that recipients may spend federal grant funds and methods for allocating those funds among state and local recipients with specific process.
To identify the alternatives that can help to determine the spending. Problem statement: The implications of federal spending is always an indecisive problem to allocate money or grants to local or state government. The federal government provides financial support to state governments in a variety of ways in the form of grants. That financial grants support covers the necessities of state or local government activities. If the decisions are weak to allocate the money then it will result deficit of grants.
In this way state or local government can implement programs with the help of federal government to utilize those grants in a right way for economic performance and future development. Literature reviews: (Galper, 1973) stated that state exogenous resources can be defined as the amount spend allocated by federal hump amount transfers, principle on outstanding debt and matching requirements expenditures and categorical closed- ended grants. It includes the agendas to set powers for legislature, committees, budgetary bargaining and the jurisdiction on how money can be distributed or allocated through various grant programs.
Federal government has right to provide assistance through a number of grants that do not come under grant programs. (Baicker, 2005) Results also suggested that many factors have contributed to the growth in health grants by federal government. From the past three decades the grants for Medicaid has nearly tripled, rising from 20 million to 53 million, this changes is due to the increase in population growth or by the changes in law decisions and by the effect of the economy in health sector. Mc Guire, 1974) stated that provisions are made to reduce funding that are authorized to cover the money for existing mandates and the reason that increase the conditions it comes under the distribution of funds to local government and provisions are made to the programs that are arranged by the government. There are many reasons that make spending responses worse and the federal grants differ their abilities to raise their revenue that depends on size and the legal limit. Hypothesis: Federal government grants can promote economic performance and efficiency when the money is implemented in a program more efficiently and effectively.
If these grants is insufficient to provide goods and services then it will be difficult to implement in such programs. 1 (Stans, 1960) If federal spending changes on intergovernmental grants then it could change in the government investment in both human capital i. e. education and the activities that can improve people life style and productivity and physical capital that includes buildings, infrastructure. If state or local government decided that it cannot handle the spending then it will make then it will make other adjustments so that it would make other changes in the federal spending.
If the federal control is less over the working of grant programs then state and local government make ways to operate those programs in more efficient and economic manner. If suppose the federal control is more an administration of grant programs then it will be difficult for the local governments to adopt practices that match to the policymaker’s goals of federal government. Federal grants are intended to supplement the efforts of local government rather than to replace them. For that reason many grant programs are implemented that include matching requirements that require local government to pay somewhat from nonfederal revenues.
If local government have to spend more on a program then they spend their own revenues according to their own policy requirements. Data Sources: This research has identified from five articles. The main aim to select those articles is to know the author findings on this topic and their views on implications of federal spending. Data sources will be from secondary sources that is analyzing the articles and making assumptions on the data. Data will be obtained from google. com and UTRGV library will comprise on the decisions of law makers that help them to implement the programs.
Data from articles will be selected on the basis of the data methods, ways to implement the problem and to solve the problem. Data analysis: In the middle of 20th century, for federal grants to state and local government there have been a share of the federal budget and Gross Domestic Product of the nation. From 1950’s to 2011 there have been increasing in grants from 1. 4% of GDP to 5. 1%. The increasing in grants is due to implementation of Medicaid and other grant programs and for the people who have low income level households.
When it reached to 1980’s there have been fluctuated in the share of federal budget and GDP but the grants for health sector has always in progress as share of all programs. And the economists believed there will be more growth in the future for health sector. Since 1980’s to till now, the federal spending on intergovernmental grants have been fluctuated. It is because as a share of total federal outlays and GDP that fluctuate the grants. 2 (. , 1971) In the period of 1980, spending was declined that provide grants to local government to spend in limited amount.
Block grants have been implemented that focused on health and drug abuse, maternal and child health, low income people and community development. These block grants is the combination of many grants that provide local government to be flexible for spending decisions. 2 The growth in federal grants to state or local government has been for the programs that are useful for individuals that have made directly through payments to service providers on their behalf. These programs include Medicaid, assistance of house, children’s health insurance program.
Federal grants have provided more funding to health sector around 48% and 52% is for other programs. 3 Methods: A number of different methods can explain policymaker’s decisions to provide rants for programs. The programs can be implemented that can increase efficiency through various activities. It is better if the decisions are made on the basis of economic efficiency that have more information.
Whether any government like federal or local or state make decisions in more efficient way they have to face circumstances that depends who gets benefits and who bears the cost. If the federal government have not sufficient information to implement the decision but they have goal to make program successful then they can take information available at the state and local level. If the state or local government gets benefits through an activity then it will be better for the federal government to provide grants to them and encourage them to invest more. These grants may also useful for state and local governments to reduce inequalities among individuals.
The programs which are implemented by the federal grants provides mechanism for federal policymakers to encourage their priorities at the state level by influencing the money spent by the state or local level and the types of programs they can spend their money. 4 They should implement the programs for state or local governments that maintain a certain level of expenditures or spending for an activity. So the federal government make decisions on the basis of distribution of funds in the form of intergovernmental grants.
It selects the alternate methods that recipients to spend federal grants. It implement methods to allocate those funds through a competitive process. Intergovernmental grants are categorized as block grants, categorical formula grants or project grants. These classification differs in the amount of control the federal government exerts over how state and local government use the grant money and in that way the federal government allocates or grant money to recipients. Block grants afford state and local government’s substantial control over spending decisions.
Their flexibility can encourage states and localities to seek innovative ways to meet the needs of their communities. Categorical formula grants are used to allocate grants to qualifying state or local government on the basis of a formula set out in legislation or by federal administrators. Project grants offer the federal government greater control and oversight of the way state and local government spend the funds they receive. Whether structured as block grants, categorical formula grants or project grants many federal grant programs impose additional conditions on recipients to ensure achievement of federal goals.
Conclusions: This paper summarizes the empirical and conceptual literature to explain about the decisions of law makers that can help to implement the programs and the nature of fiscal institutions that guide state and local spending including rules and priorities. Therefore policymakers be well to advise to reflect on the issues in making grant programs to achieve specific goals and objectives. Difficulty can arise if the intergovernmental grant activities sets their own rules and conditions for state and local government. The law makers make attempt to allocate the grants in a rational manner.
If they concentrate on long term productivity then it will be better to redistribute money. The options can include to encourage working, saving and streaming wasteful spending and to generate the money through different programs. Moreover the studies analyze changes in intergovernmental grants that are fairly small but the responses of state and local governments to the changes in grants that could be different. Spending huge amount on particular program is not always good policy, if the program can generate revenues for future development then it can implemented to make productive.
