A Refresher on Federal Grants: How They Work and Why It Matters HSFO Annual Conference Columbus, OH July 28, 2013 Federal Funds Information for States

Where the money goes: pieces of the federal budget pie Composition of Federal Outlays in FY 2012 ($ in Billions, % of Total)

Flow of federal funds traceable to states

Payments for individuals have come to dominate federal grants

What programs areas are supported by state/local grants? Federal Outlays to State and Local Governments, FY 2012 ($ in Billions, % of Total)

What are the major health and human services grants?

Types of Grants Mandatory CappedUncapped Direct Appropriation Annual Appropriation Discretionary Block Grant Formula Grant Categorical Grant Formula Grant Project Grant

What is the key difference between mandatory and discretionary spending? Mandatory Spending – Spending isn’t determined by annual appropriations – Spending dictated in authorizing legislation Discretionary Spending – Spending is determined through annual appropriations process

Mandatory vs. discretionary health and human services grants to states

How do discretionary programs work? Two-step process to receive funding – Program is created through enactment of authorizing legislation Specifies maximum amount or “such sums as may be necessary” – Program funded through appropriations process Some authorized programs not funded Many programs funded but lack current authorization – Examples: Child Care Development Block Grant, Community Services Block Grant, Refugee Assistance, LIHEAP

What are the major types of discretionary grants? Block Grants: fixed funding for general purposes, allocated to states by formula Categorical Grants: specific, narrowly defined purpose – Formula grants Noncompetitive awards based on predetermined formula Amount allocated depends on various factors (i.e. population, per capita income) – Project grants Generally awarded through a competitive process Fixed project periods/delivery of specific services Cooperative agreement (substantial federal involvement)

Composition of select discretionary programs

Discretionary: Example Programs Program Block GrantCategorical Grant Matching/ MOE Formula Grant Project Grant Substance Abuse Block GrantXX (MOE) Mental Health Block GrantXX (MOE) Maternal & Child Health Block GrantXX (both) Community Health CentersXX (matching) Preventive Health Block GrantX Ryan White HIV/AIDSXXX (both) Head StartXX (matching) Child Welfare ServicesXX (matching) Community Services Block GrantX Child Care and Development Block GrantX LIHEAPX Refugee AssistanceXXX (Matching)

How do mandatory programs work? Most mandatory spending is in the form of “entitlement” spending – Federal government legally obligated to make payments to eligible entities Uncapped entitlements: Total spending is determined by number of eligible beneficiaries and authorized benefit payments (Medicaid, SNAP) Capped entitlements: Spending capped at specific level provided in authorizing law (SSBG, CHIP) Examples of other mandatory spending – Some funding included in health care reform

How do mandatory programs work? Mandatory programs are funded by either direct appropriations in authorizing law or annual appropriations – Most mandatory spending bypasses the appropriations process altogether – Mandatory spending included in annual appropriations acts is determined by authorizing statute, not the appropriations process Some mandatory programs are block grants

How do mandatory programs work? Legislative changes to entitlement spending can be done through authorizing bills or reconciliation – Reconciliation instructions are included in the budget resolution and considered under special procedures Various statutory/procedural controls on entitlement spending – Additional mandatory spending must be offset

Composition of select mandatory programs

Mandatory: Example Programs Program CappedUncapped Block Grant Authorized for set periodAppropriated Matching or MOE MedicaidXXX CHIPXXX TANFXXXX Child Care EntitlementsXXX SSBGXXX Foster Care/Adoption AssistanceXXX Independent LivingXXX Child SupportXXX Promoting Safe and Stable FamiliesXXXX Prevention and Public Health FundXXX Vaccines for ChildrenXX SNAP AdminXXXX Child NutritionXXXX

Example: Health Care Reform Mandatory Funding Amended uncapped entitlements (Medicaid) Reauthorized capped entitlements (CHIP) Directly appropriated funding for new and existing programs Discretionary Funding Extended authorization of existing programs Authorized new programs that must receive annual approp. – Creative funding mechanisms (Prevention and Public Health Fund, initial direct appropriations)

Why does the type of funding matter? Most mandatory programs are exempt from sequestration and across-the-board the cuts included in appropriations bills. Mandatory programs continue during a government shutdown (as long as their authorization is current). Funding for discretionary programs determined by Congress on an annual basis. Mandatory programs require an authorization to operate; discretionary programs can continue without an authorization.

Current issues and themes dominating federal grants Failure of Congress to reauthorize programs – Major mandatory programs operating under program extensions – Discretionary programs operating without authorization Increased reliance on appropriations process to modify programs – Program set-asides, demonstration projects Introduction of competitive elements to current and proposed grants Increased focus on program outcomes/program integrity Trend toward program consolidation Continued focus on reforming mandatory programs

Useful grant resources GAO glossary of budget terms: FFIS links: Congressional Research Service (CRS) Reports – Federal Grants-in-Aid Administration: A primer – Entitlements and Appropriated Entitlements – Introduction to the Federal Budget Process Catalog of Federal Domestic Assistance (CFDA.gov )

The End: Questions? Contact information: Trinity Tomsic ,