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What are Block Grants? Can They Help End Poverty?

Block grants are big news these days, since they form the centerpiece of Rep. Paul Ryan’s anti-poverty proposal. The plan suggests taking all the money the federal government currently spends on 11 different programs for low-income people (including SNAP, Temporary Assistance for Needy Families (TANF), and several housing programs) and giving it directly to the states in the form of “Opportunity Grants.” 

Girl holding toy blocks
Photo by Miki Yoshihito

That’s all a block grant is: money given straight from the federal government to the states with a fair amount of leeway to use as they see fit.  In the Ryan plan, states would have to demonstrate that they actually used the money to help poor people, and they would have to follow several other guidelines, but they could each create their own anti-poverty programs.

Block grants have pros and cons. Some of the disadvantages cannot be avoided, while others can be mitigated by careful design and implementation of the grants. Here are three broad ideas about block grants in general and the proposed Opportunity Grants in particular:

They need enough funding. Imagine that you’ve been offered a job getting all the kids in your neighborhood to school. Your new boss says, “You get a choice in how you’re paid. Would you like $1,000 a month, or the cost of a bus pass for each kid?” Those are, respectively, a block grant and an entitlement program. You can see that in some situations, the flat amount might be great -- if transportation is cheap and there are only a few kids in the neighborhood, for example. But what if the bus company raises fares or dozens of new kids move into town? 

The same situations can arise with block grants for anti-poverty programs. When there’s a natural disaster, a recession, or inflation, there’s no additional money to respond. In policy terms, that means that block grants are not “countercyclical”: they don’t work to counter changes in economic cycles. Making block grants more responsive to dire circumstances and emergencies requires setting money aside in a contingency fund—and, of course, that money needs to come from somewhere. 

Also, let’s say you choose the flat rate, and you don’t get a raise for a decade or two. Worse yet, your boss shows up and says, “Next year, we’ve budgeted $850 a month instead of $1,000.”  That’s what has happened to many federal block grant programs — their budgets are cut and/or they fail to keep up with inflation.

What if $1,000 didn’t meet the costs of getting all the kids to school in the first place? This is the situation for some of the federal programs that would be folded into an Opportunity Grant: they are already insufficient to meet current needs. SNAP doesn’t last the whole month, TANF only serves a fraction of poor families, and there are long waitlists for other types of assistance (New York City alone has nearly a quarter-million residents on the waitlist for public housing). Keeping the same level of funding is better than making cuts, but it does not solve problems that are there at the outset.

States are not magicians. Giving states money and hoping they have better ideas than the federal government about how to use it may or may not be a good idea, depending on the state and the situation. But it is certain that block grants aren’t a panacea for poverty.  They don’t do anything specific to get community groups more involved. Paul Ryan’s plan refers to the wonderful work of Catholic Charities and other groups, but the reality is that such organizations are already receiving a significant amount of federal funding. States will need oversight to make sure they use their money well. And what happens when a state chooses to focus assistance on people it deems “deserving,” leaving others hungry and destitute?

As our recent experience with  Medicaid expansion under the Affordable Care Act shows, allowing states to set up their own systems can create a confusing patchwork of programs, and some states might even choose to reject the money altogether. States already get a fair amount of leeway in how they administer programs; here, for example, are the state options for SNAP. By creating a menu of possibilities for states to choose from, the federal government is able to evaluate what works—and to expand the best practices nationwide.

One of these things is not like the other.  Some of the programs that Paul Ryan wants to fold into the Opportunity Grant are already block grants – for example, the Community Development Block Grant. Other programs focus on particular groups of people or provide very specific forms of assistance. Rep. Ryan says his goal is to allow states maximum flexibility, so that families who need child care but not rental assistance—or vice versa—can be better served.  But one thing absolutely everyone, rich or poor, needs to do is eat.  As Bread for the World has pointed out, block-granting SNAP would make it harder for the program to handle spikes in need. And people can wait longer for almost anything else than for food.

Another reason that including SNAP in an Opportunity Grant is a bad idea: it would enable states to cut off people’s nutrition assistance more easily. This includes children, who are 44.5% of all SNAP participants but have no role in setting or meeting their families’ goals. States would also be allowed to use block- grant funds for things other than nutrition assistance. While transportation passes and job training are wonderful, they can’t replace food. 

 Bread for the World has welcomed Paul Ryan’s proposal, calling it “an important contribution to a serious bipartisan dialogue about ending hunger and poverty.” But it’s far from perfect, especially in its Opportunity Grants provisions. Block grants aren’t a new idea, and they aren’t an inherently good or bad idea. Whether they are effective in reducing poverty depends on how they are funded and structured, on how states use them, and on whether they are accompanied by policies that create more jobs and ensure that those jobs pay a decent wage. Any legislation that comes from Rep. Ryan’s plan would need to be carefully crafted to take advantage of the benefits of block grants while avoiding their many problems.

Stacy Cloyd

 

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