Although states reported management efficiencies under the block grants, they also experienced increased grant management responsibilities because they had greater program flexibility and responsibility. This trend reduced state flexibility. Lessons Learned

Our research suggests that three lessons can be drawn from the experience with the 1981 block grants that would have value to the Congress as it considers creating new block grants. Three characteristics of formulas to better target funds include factors that consider (1) state or local need; (2) differences among states in the costs of providing services; and (3) state or local ability to contribute to program costs. About $32 billion was awarded for block grants in 1993. Federal Transit Capital and Operating Assistance Prevention and Treatment of Substance Abuse JTPA, Title II-A: Training Services for Disadvantaged Adults and Youth Payments to States for Child Care Assistance (Child Care and Development Block Grant)

Characteristics of the 1981 Block Grants

Under OBRA, the administration of numerous federal domestic assistance programs was substantially changed by consolidating more than 50 categorical grant programs into 9 block grants and shifting primary administrative responsibility for these programs to the states. Experience Operating Under the 1981 Block Grants

Where states had operated programs, transition to block grants was smoother as states relied on existing management and service delivery systems. Although states experienced a 12-percent federal funding reduction when the 1981 block grants were created, they were able to offset these reductions for the first several years through a variety of approaches, such as carrying funding over from categorical grants. Federal Funding Allocations Based on Prior Categorical Grants

Initially, most federal funding to states was distributed on the basis of the state’s share of funds received under the prior categorical programs in fiscal year 1981. In addition, due to the lack of comparability of information across states, state-by-state comparisons were difficult. These are the following: (1) The Congress needs to focus on accountability for results in its oversight of the block grants. 15, 1985). 5, 1987).
Why GAO Did This Study

GAO provided information on federal block grant programs, focusing on: (1) states' experiences operating block grants; and (2) lessons learned that could be useful to Congress as it considers new block grants.

What GAO Found

GAO found that: (1) 15 block grants with funding of $32 billion constituted a small portion of the total federal aid to states in fiscal year 1993; (2) in 1981, Congress created 9 block grants from about 50 categorical programs to broaden program flexibility among states; (3) the states' transition to block grants was generally smooth, since the states had existing management and delivery systems for most programs, but they had difficulties in two areas because these categorical programs were entirely federally funded or directed; (4) states reported administrative efficiencies with block grants, but documenting the cost savings was difficult; (5) although the states experienced a 12-percent funding reduction under the block grants, they used various approaches, such as using carry-over funds and additional state revenues, to help them offset the funding reductions; (6) problems with the 1981 block grant included inequitable initial state allocations, the lack of useful information for Congress and program managers to effectively oversee the grants, and reduced state flexibility due to Congress recategorizing some grants; (7) lessons learned from the 1981 experience should focus on accountability for results, equitable funding allocations based on state need, ability to pay, and cost of services; and (8) states could encounter greater transition difficulties with the larger, more complex programs being considered for inclusion in the new block grants.