“Most states have at least one grant program providing aid to the poor. It’s called a block grant. Basically, every state gets a share of federal cash to spend in the general public sector. This goes to everything from roads, bridges and education—to prisons, or more accurately, to welfare,” Saez said.
What does the government spend with these funds?
In Texas, for instance, the state, which has almost $6 billion in general-fund funding, has used $21.5 million to help the poor and low-income pay their rent, utilities and other expenses in housing, food and clothing. It has also spent $2.9 million for the state’s food-pest control effort, or $1,000 for every person who’s been afflicted with the problem.
Some states have used funds more wisely, said Saez. In California, for example, the state reduced its welfare caseload by about 15,000 people.
How does block grants work?
Most block grants go to the state’s general-fund coffers. For instance, the federal government’s block grant for Medicaid, which covers 1.4 million low-income people, provides about $4.1 billion annually, and the states get a fraction of the full amount.
The states pay the federal government first, through their budget bills. Then, after states submit the bills to Congress at the end of the fiscal year, the agencies have to split the amount. The result: “The federal government pays the states a fixed amount of money for providing health care—which is what they have been accustomed to doing for many years,” said Saez.
Some states get less than the fixed amount of money that the feds pay. The average block grant for the program in 2012 was about $2,400 per person, according to the Kaiser Family Foundation.
How does the federal government determine what federal funds to use in states?
As Saez explained, when states receive money from the federal government, they get a lot of information about how it’s spent. So they can use their own information and figure the amount that may be most efficient — or least efficient.
For instance, a state that’s facing a high poverty rate may not want food stamps or Medicaid paid to local agencies. So the state could use the information to determine where to cut back on Medicaid and food stamps.
What sort of things are block grants used for?
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