Federal Block Grants: Boondoggle or Boon For Local Government?

MENTION ''block grants'' at the Department of Justice and senior officials trot out horror stories.

The now-defunct Law Enforcement Assistance Administration block grant wasted millions of dollars, they say, by sending checks to localities around the country without proper oversight. A Louisiana sheriff bought a tank for ''crowd control,'' Justice claims, while in Indiana funds went for an airplane that ended up carrying the governor around.

But over at the Department of Housing and Urban Development (HUD), officials talk about block grants more reverently. HUD's 20-year-old Community Development Block Grant Program allows states and cities wide latitude to fight urban blight. In the Marshall Heights section of Washington, D.C., such money helped turn a dying cluster of stores into a shopping center. Across the country, empty lots and shuttered buildings have become parks and community centers.

Federal block grants -- broad aid programs that allow wide local discretion in how the money is used -- are official Washington's latest crush.

Innovation by those closest to problems is the hoped-for effect of block-granting programs. ''Devolution'' of authority to state and local government has gained some appeal, especially with the new Republican majority in Congress and in the statehouses.

House Republicans want to turn much of the federal welfare system into eight block grants, an unprecedented idea for an entitlement program.

They also want to block-grant crime-fighting. Some senators suggest turning Medicaid over to the states as block grants.

President Clinton's proposed budget is sprinkled with new block grants: The Labor Department wants to consolidate 70 job-training programs. HUD wants to combine 12 public-housing programs. The Department of Transportation proposes a new ''trust fund'' -- essentially, a block grant for federal transportation monies.

But are block grants the right kind of government for a broad array of programs?

Thirty years after the first block grant began, the 15 block grants currently in existence account for only about 15 percent of federal outlays to state and local governments. Typically, Congress has set them up for lower-priority programs, says David Walker, author of a new book, ''The Rebirth of Federalism.''

The history of block grants, as the opening anecdotes illustrate, is mixed. But the stories of individual programs themselves are also ambiguous. Though the Law Enforcement Assistance Administration (LEAA) is generally remembered as a failure and Community Development Block Grants generally viewed as a success, pluses and minuses apply to each.

Pluses and minuses

When pressed, a Justice Department official can come up with innovations spawned by LEAA that remain in use today, such as a program that focused on career criminals and one targeting drugs and crime.

At HUD, officials can rattle off stories of swimming pools and tennis courts being built in wealthy suburbs, in the name of ''community development,'' or local officials going to Las Vegas with block-grant money. ''If those happened [and we found out about it],'' a HUD official is quick to add, ''we made them pay it back.''

Stories of waste, fraud, and abuse may be titillating, but they can be found in every corner of government, and with all manner of federal grants.

''The key issue on block grants is really control -- who gets to decide how the money is spent,'' says a federal government expert on block grants. This expert, who dealt with the old law-enforcement block grants from a major city, says that the abuses largely took place early on and that as time went on, the mandate was refined and regulations added. For a variety of reasons, the program died in 1979.

''The reason Justice is so upset now about the [proposed] block grant,'' he says, ''is they won't be able to say they put 100,000 new cops on the street,'' the centerpiece of President Clinton's 1994 crime bill. Clinton has threatened to veto the block-grant bill.

House Republicans want a public-safety block grant that allows a broad range of uses, from hiring new police to buying equipment to funding crime-prevention programs like midnight basketball.

The challenge with any block grant is to marry a national goal with local flexibility and enough oversight to keep the money from becoming a slush fund for state and local officials.

The term block grant, in fact, can be so wide as to be almost meaningless. Typically, they are born with relatively few strings attached, then slowly become ''recategorized'' as Congress and federal agencies impose mandates and regulations, says Professor Walker, who teaches at the University of Connecticut (UC) in Storrs.

Jim Broughman, director of block-grant programs at HUD, recalls at the start of the Community Development Block Grant Program in 1974 ''there was a very definite decision by policymakers not to have handbooks. They were seen as anathema.''

''But after two or three years, you started hearing about new tennis courts and swimming pools in affluent areas, so we began to come out with ground rules,'' he says. President Carter focused the program more on helping low- and moderate-income people. Under President Reagan, regulations were axed, but Congress, over time, added rules.

Still, the $4.6 billion Community Development Block Grant (CDBG) Program is ''one of the most popular programs on Capitol Hill,'' says Chris Walker of the Urban Institute and author of a forthcoming study on CDBG.

In fact, the program's modus operandi breeds popularity: It funds projects in every congressional district, rather than concentrating money on the nation's most blighted cities. In turn, popularity breeds security: Communities know they can count on the cash, and so can find private partners to help fund projects.

Even so, quantifying success is difficult for CDBG, a challenge that will apply to any new block grants.

The issue of accountability came up recently when Michigan Gov. John Engler (R) testified on Capitol Hill. In arguing for the block-granting of welfare, Governor Engler declared he wanted ''no strings'' attached.

But when probed, he made clear that did not mean a lack of federal oversight. ''I want you for the next five years to say, take charge of these programs, we'll give you the money without the strings -- but here are the factors by which we are going to evaluate you,'' said Engler.

''Republicans like the theory of block grants,'' says Walker of UC. ''But in practice, they're just as quick as anyone to get agitated about how the money is to be spent.''

Agitation describes well the feeling about block grants in various quarters around Washington. Last month the Service Employees International Union of the AFL-CIO released a report called ''Block Grants: Backdoor Budget Cuts.''

It found that when programs are block-granted, they get lower budget increases than similar programs that remain as categorical grants. The result, the study predicts, will be ''permanent underfunding of essential services.''

If so, then why are state legislatures and GOP governors so eager to block-grant welfare? Republican governors talk of setting up ''rainy day'' funds to protect themselves during recessions. But last month, the nation's governors failed to reach a consensus on eliminating welfare's entitlement status.

''We need a national standard for taking care of children,'' says Gov. Howard Dean (D) of Vermont, chairman of the National Governors' Association.

At the libertarian Cato Institute, block grants are viewed negatively because they separate the ''raiser'' of the money, the federal government, from the spender, state and local governments. A better form of devolution would be to eliminate the federal role altogether in social areas and pass those functions completely to the states.

That's what Sen. Nancy Kassebaum (R) of Kansas, chair of the Senate Labor and Human Resources Committee, has proposed for welfare reform (in exchange for greater federal responsibility for Medicaid).

It's unclear how much support she has in Congress.

About those cops

But perhaps the most agitation of all is being felt at the Justice Department, which raises the specter of LEAA -- and extols the virtues of its 100,000 new cops program -- at every opportunity.

This week the House Judiciary Committee fought back, issuing a list of nine application and oversight requirements for the crime block grants that, it says, will help prevent abuse of the program.

The Senate version, too, lists guidelines and oversight provisions. But it also contains the seeds of another dispute: who gets the block grant money. The House wants it to go straight to local governments. The Senate wants the states to hand it out.