Why are block grants better?

The first rule of the fund-raising game is to make sure that the grantees spend as little as possible, and the second rule is that the amount of money available each year should roughly track the size of the program that the grantee is going to implement. But a grantee can only use its grant to fund so many projects that are truly innovative. As the size of the U.S. grant program shrinks, only limited amounts can be spent on innovative programs. And, as I’ve discussed below in more detail, the same principle holds true for any organization that can’t raise all it is asking for.

There is a third issue with block grant politics—that of “churn.” If you can’t raise enough money to pay for your projects, your grants are going to be worthless. Churn is especially harmful in that block-grant organizations can be incredibly stingy. The best example is the U.S. Department of Agriculture, which has about one third of the annual grant volume of any other grant recipient (it has more than twice the budget of all other grantees combined). This means that a grant from the agency is not an easy or cheap option to obtain. Churn is especially damaging in the context of a budget surplus, but it’s worse for an administration on the brink of a deficit. The U.S. Department of Transportation, for example, is spending just 2.4 percent of its budget on major projects and is operating at a profit.

All of these factors make the funding of large block grants, such as the one currently being considered by the House Republican Congress, particularly problematic. The current legislation is not a breakthrough legislation in that it will bring about more funds to fund innovative projects in our communities. Rather, it is simply a step in a long-term strategy, which seeks to move funds away from the established, established priorities that block grants already serve to areas that will be of much greater benefit to innovators.

In the future, our efforts will be better served by using the full power of federal funding to move towards the areas of greatest need, and by shifting away from the grants to the private and philanthropic sectors. For this, it will be important if the government makes the public-private partnership model its own initiative. As it works, it could develop a funding model that would be more innovative, effective, and efficient—and could also be tailored to best serve the needs of individual communities.

Is it possible that big-money supporters