Federal Grants to State and Local Governments - Notes - March 2013

Oct 15, 2026

Uploaded by Jake

Federal fiscal year 2011 federal grants to state and local governments totaled $607 billion, representing 17% of federal outlays, 4% of GDP, and roughly a quarter of state and local government spending. Over the prior 30 years, intergovernmental grant shares of federal outlays have varied. Health-related grants, especially Medicaid, expanded rapidly, while grants tied to education, transportation, and income security also rose more slowly. The report explains rationales, funding flexibility, distribution methods, and how federal rules affect state and local spending and grant budgeting.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages28

Reading Time1 h 11 min

AccessFree to download

Summary

Why Does the Federal Government Make Grants to State and Local Governments?

How Much Flexibility Do State and Local Governments Have When Spending Federal Grant Money?

How Does the Federal Government Distribute Grant Funds to State and Local Governments?

How Does the Federal Government Determine the Budgetary Cost of State and Local Grants?

How Do Federal Grants Influence State and Local Government Spending?

What Are Some Implications of Changing the Level of Funding or Flexibility of State and Local Grants?

Federal Outlays for State and Local Grants

Trends Since 1980

Projections for the Next Decade

Other Federal Support for State and Local Governments

About This Document

CBO Federal Grants to State and Local Governments Education Outlays in 2011 for Federal Grants to State and Local Governments Health ($293 Billion) ($89 Billion) Transportation ($61 Billion) Income Security ($114 Billion) Other ($50 Billion) MARCH 2013 Notes Unless otherwise noted, all years referred to in this report are federal fiscal years, which run from October 1 to September 30. On the cover (clockwise from the top): © Olesya Feketa; Washington, D.C., highway, photo by Maureen Costantino, Congressional Budget Office; coastal construction and protection using tires to protect the shore at Port Wing, Wisconsin, photo by Dale R. Baker, Environmental Protection Agency; © wavebreakmedia; © Espelt. CBO Pub. No. 4472 Contents Summary 1 Why Does the Federal Government Make Grants to State and Local Governments? 1 How Much Flexibility Do State and Local Governments Have When Spending Federal Grant Money? 1 How Does the Federal Government Distribute Grant Funds to State and Local Governments? 1 How Does the Federal Government Determine the Budgetary Cost of State and Local Grants? 2 How Do Federal Grants Influence State and Local Government Spending? 2 What Are Some Implications of Changing the Level of Funding or Flexibility of State and Local Grants? 2 Federal Outlays for State and Local Grants 2 Trends Since 1980 2 BOX: MEDICAID AND THE CHILDREN’S HEALTH INSURANCE PROGRAM 5 Projections for the Next Decade 7 Other Federal Support for State and Local Governments 7 Rationales for Intergovernmental Grants 7 Economic Efficiency 8 Redistribution of Resources 8 Economic Stabilization 9 Influence on State and Local Government Activities 9 BOX: ADMINISTRATIVE COSTS OF FEDERAL GRANTS 10 Policy Experimentation 12 Federal Control Over State and Local Grants 12 Determining How Grant Recipients May Spend the Funds They Receive 13 Methods of Allocating Federal Grants 14 Expected Federal Budgetary Cost and Its Predictability 15 Federal Influence on Spending by State and Local Governments 16 Matching Requirements 16 Maintenance-of-Effort Requirements 17 Estimates of State and Local Responses to Federal Grants 18 Implications of Modifying Federal Grant Programs 19 Amount of Federal Spending 19 Extent of Federal Control 19 List of Figures 21 About This Document 22 CBO Federal Grants to State and Local Governments Summary In fiscal year 2011, the federal government provided $607 billion in grants to state and local governments. Those funds accounted for 17 percent of federal outlays, 4 percent of gross domestic product (GDP), and a quarter of spending by state and local governments that year.1 Over the past 30 years, those “intergovernmental”grants—financial transfers from the federal government that support a wide range of state and local programs—have fluctuated as a share of federal outlays. Federal grants for health programs, primarily Medicaid, have grown rapidly, and grants for programs and initiatives not related to health—such as those associated with income security, education, and transportation—have also increased, albeit at a slower rate. In total, the federal government reported outlays in 2011 for more than 200 intergovernmental grant programs, which were administered by 30 federal departments and independent agencies. Why Does the Federal Government Make Grants to State and Local Governments? Grants to state and local governments can promote economic efficiency in instances when those governments have localized knowledge that would permit them to implement a program more efficiently and effectively than the federal government could but when they have insufficient incentives or funding to provide a good or service—infrastructure, for example—whose benefits extend beyond their jurisdictions. In addition, some grants use the broad federal tax base to redistribute resources among communities and individuals, and certain interg

FAQs

What scale and economic importance did federal intergovernmental grants have in fiscal year 2011?

In fiscal year 2011, the federal government provided $607 billion in grants to state and local governments, accounting for 17% of federal outlays, 4% of GDP, and about a quarter of state and local spending that year.

Why does the federal government make grants to state and local governments?

The report explains grants can improve economic efficiency when local governments can implement programs more effectively, redistribute resources using the federal tax base, stabilize the economy, advance federal policy priorities, and support policy experimentation at subnational levels.

What determines how much flexibility states and local governments have in using federal grant money?

Grant programs vary: block grants allow broad use within general parameters, categorical formula grants impose more spending constraints, and project grants typically restrict spending to the selected project. Grants may also add conditions related to the grant’s purpose or broader compliance rules.

Oct 15, 2026

Uploaded by Jake