Block Grant

What Is a Block Grant?

A block grant is an annual sum of money that is awarded by the federal government to a state or local government body to help fund a specific project or program. These became official in the U.S. beginning in 1966.

This form of federal assistance is often associated with supporting social welfare projects, such as Medicaid, public housing, education, and job training.

Key Takeaways

  • Block grants are federal funds earmarked for specific state or local programs.
  • A block grant is supported by federal funds but administered by state or local governments, the thought being local authorities are better suited to handle local issues.
  • Such programs are often meant to improve social welfare programs.
  • Most block grants, therefore, support public housing, health, or other social services.
  • Opponents of block grants claim that they are a waste of taxpayer dollars and are often misspent.

Understanding Block Grants

Block grants have been in use in some form since the 1950s. Most have supported social services, public health services, or community development programs. Block grants were designed to provide funding for those services with relatively few strings attached, allowing local governments to manage and oversee the programs.

In addition, state and local governments may 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.

Block grants have fallen out of favor in recent years. A 2017 attempt to revamp Medicaid as a block grant program failed. A number of block grant programs still exist. One enduring example is the Community Development Block Grant (CDBG) program under the U.S. Department of Housing and Urban Development, which began in 1974.

Critics of block grants cite the relative lack of federal oversight as a problem. Notably, the proposal to turn Medicaid into a block grant program was seen as endangering the federal government's ability to guarantee a standard level of service.

Block grants have been in use since the 1960s, but have fallen from favor a bit in recent years.

Criticism of Block Grants

While block grants are intended to promote social good by helping states fund important programs, some have held critical views of these programs. Because the recipients of block grants have a great deal of flexibility in how those dollars are actually spent, opponents argue that federal money can be misused by local authorities. Money received from block grants often cannot be tracked or audited in the same way that categorical grants (intended for a specific purpose) can, compounding these concerns.

Local officials can therefore be thought to direct the funding from block grants to those communities who have the greatest political influence in order to curry favor and votes, while ignoring those underserved communities that the money was ostensibly intended for.

Proponents of block grants typically argue that programs will be more effective and better suited to each state's needs when decision-making shifts to the states since local authorities have a deeper knowledge of their constituencies.

Examples of Block Grants

Three of the better-known block grant programs are earmarked for social services delivered at the local level:

The Community Development Block Grant Program (CDBG)

The CDBG program, administered by the Housing and Urban Development (HUD) agency, says it "aims to viable urban communities by providing decent housing and a suitable living environment" with a focus on "low- and moderate-income persons." It has provided more than $160 billion in grants through mid-2021. The grant amounts are awarded according to a formula based on a community's needs, including its extent of poverty, overcrowding, and population growth.

Mental Health Block Grant (MHBG)

The Mental Health Block Grant, established in 1981, has disbursed millions of dollars to states to assist in the treatment of mental illnesses. The grant was amended in 1986 to require that states develop services based on the advice of Mental Health Planning Councils comprised primarily of family members and non-treating professional citizens.

Social Services Block Grant Program (SSBG)

The Social Services Block Grant Program (SSBG) is a broadly defined program that allows states and territories to tailor social service programming to the needs of their populations. Administered by Health and Human Services, the program is intended to "reduce dependency and promote self-sufficiency; protect children and adults from neglect, abuse, and exploitation; and help individuals who are unable to take care of themselves to stay in their homes or to find the best institutional arrangements," according to the department's Office of Community Services.

What Are the 4 Main Types of Grant Funding?

Grants are awarded in one of several ways. The main four are: 1) competitive, whereby bidders submit applications based on merit or need asking for a specific amount; 2) formula, which uses an algorithm to allocate predetermined amounts of funds based on objective need; 3) continuation funding, where prior grants are renewed; and 4) pass-through funding, with federal funds passed to state authorities to be used for federal programs, such as transportation.

What Is the Difference Between a Block Grant and a Categorical Grant?

A block grant can be used for a variety of purposes, with the distribution of funds overseen and allocated by local authorities. A categorical grant is awarded for a singular and specific purpose, with distributions audited to ensure the intended recipient.

Do Block Grants Increase State Power?

Because block grants give states or local authorities discretion with how to spend otherwise federal funds, they do increase the state's power to spend in that way. Proponents argue that this increases the efficiency of grant funds since local politicians and directors will have greater knowledge of their own area than those in Washington, D.C.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Maybelle Taylor Bennett and Leticia Perez. "Block Grants, Beyond the Rhetoric: An Assessment of the Last Four Years." Coalition on Human Needs, 1986.

  2. Dept. of Housing and Urban Development. "Community Development Block Grant Program."

  3. Congressional Research Service. "Community Development Block Grants: Funding and Allocation Processes," Page 1.

  4. U.S. Congress. "S.1744 - State Comprehensive Mental Health Services Plan."

  5. Dept. of Health and Human Services. "Social Services Block Grant Program."

Take the Next Step to Invest
×
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Service
Name
Description