14th Annual Meeting of the OECD Network on Fiscal Relations Across Levels of Government, 19-20 November 2018

1. Conditional Grants: Value
for Money? Targeting the
Right Recipients?
DAVID ROWE
DEPUTY ASSISTANT DIRECTOR FOR BUDGET
U.S. OFFICE OF MANAGEMENT AND BUDGET

2. Grants to State and Local Governments:
Size and Scope
Over 1,700 grant programs, administered by nearly 30 federal agencies.
Federal Grant Programs:
◦ About third of total State spending (31.3 percent).
◦ 3.5 percent of GDP.
Medicaid (health care for low-income individuals) is by far the largest, where the Federal
government picks up a large share of costs.
Other Federal programs make up a smaller share of State/local spending.
◦ For instance, federal support for education is only about 8%.
Nearly all have terms and conditions attached to them (not revenue sharing or block grants).

3. Grants to State and Local Governments:
Funding History
0
100
200
300
400
500
600
1940 1950 1960 1970 1980 1990 2000 2010 2017
BillionsofDollars*
Fiscal Year
*Constant FY 2009 Dollars

4. Brief History
Prior to the 1960’s, most grants just provided supplemental assistance, and
didn’t intrude on state/local prerogatives.
In the mid-1960’s/1970’s, the Federal Government created new grant programs
to achieve national goals, and mandates that were broadly tied to recipients of
Federal financial assistance.
Relatively small, yet still significant, federal grant funding leveraged significant
changes in policies at the State and local levels.

5. Education Example: The Individuals with
Disabilities Education Act (IDEA)
Grants to States to support special education and related services to students
with disabilities.
Prior to the IDEA, roughly one-fifth of students with disabilities received no
education, and many States had laws excluding some students with disabilities
from school.
IDEA required States and schools to provide a Free Appropriate Public Education
for students with disabilities, and included detailed requirements and due
process protections.

6. Different Approach: Race to the Top
The Recovery Act of 2009 included $4+ billion in competitive grants to States who adopted four
education reforms:
◦ Rigorous standards and assessments
◦ Data systems that measure student academic growth
◦ Recruiting and retaining effective teachers
◦ Turning around the lowest-achieving schools
Temporary surge of funding, and three competitions, to motivate States to adopt particular
strategies.
◦ Strategic use of recovery funding
◦ One-time, rather than a permanent stream of new Federal funding.

7. Proper Use of Federal Funds
• Improper payments in State-based direct benefit programs (e.g., food
assistance).
• Efforts to improve data/data matching.
• Tension between reducing improper payments and burden.
• While most conditional grants have broad flexibility in how the funds are used,
there is also an infrastructure to make sure funds are used properly.
• Single audit for entities receiving multiple grants.
• Comprehensive risk-management strategies
• “Watchdog” Offices: Agency Inspectors General, Government Accountability Office
• President’s Management Agenda Cross Agency Priority (CAP) Goal: Results-Oriented Accountability for
Grants
• Reduce compliance and reporting burden.
• Risk-based, data driven framework that balances compliance with results.

8. Accountability and Performance
While conditional grants have helped equalize funding and achieve key national
goals, implementing accountability requirements has been more challenging.
No Child Left Behind: Tied Title I funding (the largest Education grant) to
accountability requirements.
◦ Math/reading assessments for students in grades 3-8.
◦ Schools meeting “adequate yearly progress” (AYP) in improving performance overall and
among subgroups.
◦ Schools that failed to meet AYP were subject to a series of requirements and sanctions.

9. Improving Evidence and Evaluation
Efforts across multiple administrations to build an infrastructure for evidence-based
policymaking, including:
Published evaluation policies at some Federal agencies
Development of multi-year learning agendas
Some grant funding focused on evidence-based programs with evaluation requirements,
established through legislation, policy, or regulations
◦ Ex: Tiered Evidence Grants, Pay for Success
Flexibilities for states/grantees to use some funding for evaluation
Improving data access and data governance
Federal grants require performance metrics, but quality varies

10. History of Major Federal Evidence Efforts
Years Evidence Efforts
Late 1960-1996 Income maintenance experiments, state waivers, welfare reform
1993-2001 Government Performance and Results Act (GPRA)
2001-2009 Program Assessment Rating Tool (PART)
2009-2016 -GPRA Modernization Act
-OMB Guidance regarding evidence and evaluation
-New programs, funding requirements, initiatives including Tiered Evidence grants
and Pay for Success
2016-Current -Commission on Evidence-based Policymaking
-OMB Guidelines on Monitoring and Evaluation for Foreign Assistance
-Social Impact Partnership Pay for Results Act (SIPPRA)
-Reorg proposal to Strengthen Federal Evaluation
-President’s Management Agenda: Federal Data Strategy and Results Oriented
Accountability for Grants
10

11. Conditional Grants: What’s Next?
Legal/Constitutional Limitations: The U.S. Constitution limits the Federal
government’s role in state/local activities.
◦ Related to the funds being provided, and cannot cross the line from enticement to coercion.
◦ Unclear how courts will view grant requirements going forward.
Holding pattern when it comes to significant legislative changes to conditional
grants.
◦ Not in a period of significant expansion or retraction in grants or the requirements behind
them.
Consideration of new (and sometimes controversial) conditions and
requirements (e.g., work requirements).