DEFINITION of 'Block Grant'

Money that is awarded, or granted, by a national government to state and local officials. Block grants are earmarked for a specific project or projects, and typically there are guidelines as to how the money can be spent. In addition, state and local governments add their own guidelines and will sometimes distribute a portion of the grant to other organizations, which likewise have their own guidelines and rules regarding how the money is used and for what purpose.

BREAKING DOWN 'Block Grant'

A good example of a well-known block grant in the United States is the Mental Health Block Grant. Established in 1981, the MHBG has disbursed millions of dollars to individual states to assist in the treatment of mental illnesses. The grant was amended in 1986 to require that states utilize State Mental Health Planning Councils, comprised primarily (at least 51%) of family members and non-treating professional citizens, who develop comprehensive service plans.

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