Block Grants Definition, Types & Examples - Lesson | Study.com (2024)

In addition to the federal government offering state and local governments funds for broad programs through block grants, the federal government can also give money to state and local governments through categorical grants. Categorical grants, however, are given for a specific purpose. An example of a categorical grant would be Medicaid, which provides health care for lower-income people. Funding for Medicaid comes from the federal government and is given to the states specifically to pay for the Medicaid programs within their state.

Although both types of grants provide funding from the federal government to state/local governments, there are differences between block grants and categorical grants. Because block grants are issued for a broad purpose, they have fewer requirements regarding how the money is spent. This reduces the power of the federal government and gives the state and local governments more control to determine how they would like to spend their money. Categorical grants have specific criteria that have to be met for the state governments to receive the funding. This gives more power to the federal government and diminishes the power of the state governments because the federal government could cut or eliminate funding if the state wouldn't follow the established criteria.

Block grant examples include:

The TANF block grant is an example of a block grant. The Temporary Assistance for Needy Families (TANF) block grant is given to states to operate their own programs to provide financial assistance to families in need. This can be in the form of childcare expenses, work assistance, and job-finding services.

The Low Income Home Energy Assistance block grant is another example of this type of grant. This program, established in 1981, gives financial assistance to families who need help with energy costs. This program operates through a formula grant. The federal government provides funding to states to administer the program and to receive assistance; recipients need to meet income guidelines.

There are several advantages of block grants. Block grants allow the states to have more control over how money is spent. It is the state and local governments that are more directly connected to the citizens of the state and are better able to determine what the needs are of their citizens. Block grants also allow state governments to develop more long-term spending goals and planning because they know they will be receiving the funding and can use it as they see fit.

However, many are critical of block grants. Some would argue that block grants aren't often spent on their intended purpose because there are few guidelines to follow by the states. Since block grants are administered by the state governments, there is little oversight by the federal government to regulate how the money is spent. One such criticism occurred when the Aid to Families with Dependent Children (AFDC) was converted to TANF. AFDC gave cash assistance to needy families directly. Since the AFDC was converted to TANF, some believe that funds aren't going to individuals who need direct financial assistance. In addition, many believe that states divert funds from programs when they receive a block grant, such as with TANF. This hurts those who are in need of assistance.

Grants are a way for the federal government to give money to the state and local governments. Under federalism, the federal government can influence the state and local governments by offering grants to follow specific rules and guidelines. The two main types of grants. There are block grants, which give money to the states from the federal government for broad spending categories. There are also categorical grants, which give funds from the federal government to state governments, but specific guidelines and criteria must be met. Block grants give state governments more control over how money is spent and are favored by people who want more local government control. In comparison, categorical grants give more control to the federal government.

However, block grants aren't without criticism. Many believe that funding decreased when welfare programs were converted from a categorical grant to a block grant. The TANF block grant is one such example. Temporary Assistance for Needy Families (TANF) eliminated direct cash payments for families and replaced it with state-run programs to help families in need for things like child care and job training. Because TANF eliminated direct cash assistance for families, many argued that this example of a block grant took money away from those who genuinely need it. Opponents of block grants believe that they tend to cut funding for needed programs.