Federal Grants, Earmarked Revenues, and Budget Crowd-Out: State Highway Funding

This paper examines the potential for budget crowd-out in state highway financing. Highway projects are funded primarily through state earmarked tax revenues and federal highway grants. Theoretically, these two sources of revenues could crowd-out state general funds, freeing up these funds for other uses. Previous studies of highway funding show little evidence of significant crowd-out, providing support for the "flypaper effect." The empirical model of this paper better controls for the endogeneity of federal highway grants and state earmarked highway revenues than previous studies and results suggest little to no crowd-out. Also, our study concludes that state budgeting decisions in the post-Intermodal Surface and Transporation Efficiency Act era still support the "flypaper effect."     

Political Economy of Grant Allocations: The Case of Federal Highway Demonstration Grants

This article examines the political economy of U.S. federalhighway demonstration grant allocations. Demonstration grantsare a rapidly growing segment of federal highway grants directlyearmarked for a congressional district by Congress, unlike themajority of highway grants where Congress determines a formulaand allocates funds accordingly to states. Our empirical analysis,considering the period 1983–2003, suggests that a state'sability to attract demonstration project grants is positivelyinfluenced by its contributions to the highway trust fund andpolitical variables, and it is not affected by the formula highwayaid and vehicle miles traveled in a state.     

The Forgotten Regional Organizations: Creating Capacity for Economic Development

Government capacity helps explain variance in public sector organizations' performance, and measuring capacity helps identify deficiencies that may be addressed in order to improve the efficiency and effectiveness of these organizations. This study examines the capacity of regional economic development districts to leverage federal grant funds in the counties they serve, controlling for additional sources of potential capacity and demand for federal grants. A decade of data reflecting federal grant funding to counties in one state was compiled from the Federal Awards Data System and analyzed using pooled cross-sectional time-series analysis with panel-corrected standard errors. The results indicate that regional economic development districts demonstrate varied but significant capacity to leverage federal grant funds in the counties they serve. The results suggest that similarity in the purpose and structure of regional economic development districts within a state are not enough; we need to better understand the resources within the organization and the mission that determines how those resources are applied.     

The Role of Federal Budget and Trust Fund Institutions in Measuring the Effect of Federal Highway Grants on State and Local Government Highway Expenditure

Federal highway financing institutions affect the response of state and local government spending to federal highway aid. Most previous studies of the spending effects of federal highway grants consider federal highway expenditure as the highway grant variable, disregarding the reimbursement nature of this expenditure and the multiyear availability of highway aid. This article argues that obligations of federal highway aid to states rather than actual federal expenditure should be used in models assessing the spending effects of federal highway grants. Considering federal obligations rather than expenditure results in a greater effect of highway grants on spending than reported in previous studies.     

State Infrastructure Banks and Intergovernmental Subsidies for Local Transportation Investment

This study reviews State Infrastructure Banks (SIBs) as an innovative financing mechanism for federal and state governments to support transportation financing for local governments, and determines the cost savings realized by local governments from receiving SIB loans rather than financing through the municipal bond market. The study finds that SIBs provide a mechanism through which local governments receive subsidized loans for their transportation investments. With the Ohio SIB, localities realized average borrowing cost savings between 34 and 184 basis points. Under the worst‐ and best‐case scenarios, 83 and 98 percent of projects, respectively, benefited from lower borrowing costs.     

State Tax Credits and "Making Work Pay" in Post-Welfare Reform Era

This article outlines the work incentives and income support provided by the federal Earned Income Tax Credit (EITC) and illustrates how state earned income and dependent care credits assist working poor families. State earned income and dependent care tax credits serve as critical complements to the EITC, the federal government's largest antipoverty program. By attending to specific components of each tax credit, state policymakers can maximize state funds that qualify for federal maintenance of effort requirements under the Personal Responsibility and Work Opportunity Reconciliation Act (PROWRA), and they can reinforce positive effects and offset work disincentives stemming from current federal tax parameters.     

Intergovernmental Politics in the Allocation of Block Grant Funds for Substance Abuse in Michigan

This article examines the intersection between federal programmaticgoals and state politics in the allocation of substance-abuseblock-grant money by the State of Michigan. The Alcohol andDrug Abuse and Mental Health Services (ADMS) block grant allowsstates more flexibility in allocating "Drug War" funds. TheADMS formula determines the amount of money going to Michiganbut does not determine the distribution of funds within thestate. An examination of the distribution of ADMS funding amongthe eighteen coordinating agencies in Michigan finds that neitherthe state nor the national formulas distribute funds in a mannerthat reflects substance-abuse deaths. Michigan's formula producesa result consistent with the federal formula, despite the separatestate and national formula negotiations. The process is notone of bargaining or even coercion; it may be described as mutuallyindependent decisionmaking—or parallel policies. Modelsof intergovernmental relations must be revised to include thepossibility of joint synergistic action without coordination.     

Capacity,Guidance, and the Implementation of the American Recovery and Reinvestment Act

Programs administered by the U.S. Department of Energy under the American Recovery and Reinvestment Act (ARRA) of 2009 were designed to spur investment in clean energy and jump‐start the economy. There was considerable variation, however, in the proportion of obligated funds that states spent during each year. A primary goal of the ARRA was to infuse as much money as possible into the struggling economy; however, there was significant variation in the success with which states implemented these programs. This article draws on and extends the literature on intergovernmental implementation to explain such variation. The authors argue that jurisdictional capacity and federal guidance were important determinants of the rate at which states spent ARRA funds and, more important, that these factors interacted with one another in the implementation process. This assertion is tested using a mixed‐methods approach that includes a regression analysis of state ARRA spending between 2009 and 2012, as well as an evaluation of interviews conducted with 46 state agency representatives responsible for spending ARRA energy funds.     

Explaining the distribution of State funds for national road investments between counties in Norway: Engineering standards or vote trading?

Road investment planning in Norway is officially based on cost-benefit analyses, but the results of such analyses have been shown to have little impact on policy. This paper analyses the distribution of state investment funds for national roads between counties in Norway, trying to find a rational choice explanation of the departure of road investment policy from cost-benefit considerations. Three models are proposed to explain the distribution of investment funds between counties: (1) the highway sufficiency rating model, (2) the net economic benefit model and (3) the vote trading model. Analyses for 1990–93 and 1994–97 investment planning terms support the highway sufficiency rating model and the vote trading model. The net economic benefit model is not supported. The highway sufficiency rating model and the vote trading model are highly correlated, making their relative explanatory contributions impossible to identify.     

Federalism and Safety on America's Highways

Safety on America's highways has long been an important statepolicy issue, but since the 1960s Congress has used incentivegrants, crossover sanctions that threaten to withhold federalhighway funds, and diversionary sanctions that force statesto use highway funds for safety purposes as a means of compellingstates to adopt traffic safety policies. In an effort to promotepublic health, Congress has, at times, pushed states to adoptlower speed limits, mandatory motorcycle helmet laws, occupantprotection laws, and laws designed to deter impaired driving.This article examines which fiscal tools have been effectivein getting states to adopt traffic safety policies, how stateshave responded to changes in federal priorities on public healthgoals, and the implications of these policy efforts for publichealth.     

Block grants and state discretion: A study of the implementation of the partnership for health act in three states

This article examines the use of federal funds provided to state health departments under a grant consolidation of eight previously categorical health programs in Michigan, Pennsylvania, and Alabama in a comparative context. The primary question addressed is why the three states chose to describe their allocations of funds within the total health department budget differently, and what political, administrative, and bureaucratic factors explained the differences. Although certain factors were found to be at work in all states (e.g. each had an incentive to concentrate the reported use of federal funds to simplify federal audits) these factors combined with circumstances unique to each state to produce different expenditure patterns. After examining the experience of three states, general hypotheses are developed. For example, it is hypothesized that more volatile changes in allocations will result from grant consolidations in policy areas which do not address basic service needs. Finally the decision-making process with respect to block grant funds is characterized as one in which a small group of professionals determined allocations autonomously with relatively little input from interest groups or other actors within state government; nevertheless, the external political and administrative environment severely limited the possibilities of realistic choice in each of the three states studied.I wish to thank the National Center for Health Services Research which supported this study under grant HS 01495. I am indebted to the state health department officials in Alabama, Michigan, and Pennsylvania who made this research possible. I would also like to thank Leonard Robins, Janet Shikles, William Schmalzreid, Bruce Vladeck, John Kingdon and Robert Baitty for comments on an earlier draft. Of course the views expressed are my own and in no way reflect the positions of the Department of Health and Human Services.     

The Consequences of Shifting Control: Federal and State Distribution of Small Cities CDBG Funds in Four Southern States

Following the shift of the Small Cities Community DevelopmentBlock Grant program in 1982 from federal to state control, foursouthern states—Alabama, Georgia, Louisiana, and NorthCarolina—adopted policies intended to reduce, if not eliminate,the federal emphasis on housing rehabilitation and other activitiesthat benefit lower income groups. These states now emphasizepublic works projects, which benefit a broader spectrum of thepopulation, as well as policies designed to spread funds broadlyacross communities. As a result, the share of funds going tosmaller communities has increased substantially. States alsoappear to be allocating fewer funds to poorer communities thandid federal officials, although to date the difference is notsubstantial.     

Congressional allocation of federal funds: The Job Training Partnership Act of 1982

This paper examines the allocation of federal funds to the fifty states through the Job Training Partnership Act of 1982. Targeted at the economically disadvantaged, its allocation formula nevertheless places heavy weights on unemployment measures unrelated to the target group. Evidence is presented that supports the premise that JTPA formula allocations across states reflect political influence. This is the first study to find evidence of a relationship between state representative legislative tenure and federal fund allocations. The importance of a state's political power in influencing federal fund allocations is also revealed.     

Does more federal environmental funding increase or decrease states' efforts?

We examine the flow of federal grants‐in‐aid from the U.S. Environmental Protection Agency (EPA) to the states. We simultaneously model two dependent variables (the flow of EPA funds, and state environmental and natural resource budgets) to identify the independent roles of state political institutions, political preferences, economic and demographic characteristics, and the task environment. Our central focus, though, is on the relationship between grants and state spending after taking into account those direct effects. We examine the evidence for positive association (a flypaper effect) and negative association (crowding out). We show the different roles for political institutions, political preferences, demographic and economic characteristics, and the task environment in each spending context. Most importantly, we find evidence for a flypaper effect between federal funds and state spending: Federal spending and state spending are positively correlated after accounting for the contribution of the unique factors. © 2010 by the Association for Public Policy Analysis and Management.     

The National Governance and Policy Context of Social Impact Bond Emergence: A Comparative Analysis of Leaders and Skeptics

Abstract

Proponents of the Social Impact Bond (SIB) model put forward a value-for-money case for SIBs based on new resources, efficiency enhancements and innovation for social service delivery, suggesting broad potential for SIB uptake in varying national contexts. SIB use has however been concentrated in Anglo-Saxon liberal market economies. This paper analyses the possibility that SIBs are proceeding given their alignment with particular governance and policy regimes, as opposed to any universal superiority from a cost-effectiveness or efficiency perspective. A comparative analysis is undertaken of the United Kingdom and the United States, leaders in SIB implementation, with France and Germany. A range of indicators representing the adoption of neoliberal governance approaches are reviewed and linked to their complementarity with the SIB model. Policy implications for SIB governance are then explored.     

A political theory of intergovernmental grants

This paper formulates a political theory of intergovernmental grants. A model of vote-maximizing federal politicians is developed. Grants are assumed to buy the support of state voters and the ‘political capital or resources’ of state politicians and interest groups which can be used to further increase the support of state voters for the federal politician. The model is tested for 49 states. Similarity of party affiliation between federal and state politicians and the size of the Democrat majority in the state legislature increases the per capita dollar amount of grants made to a state. Likewise, increases in both the size of the state bureaucracy and union membership lead to greater grants for a state. Over time, the importance of interest groups (bureaucracy and unions) has increased relative to political groups (state politicians).     

Interstate and Intergovernmental Factors Affecting the Conditions of Rural Bridges

Many of the nation's rural highway bridges are structurallydeficient, functionally inadequate, or both. Rural bridges areparticularly likely to be in poor condition in states wherethe federal government plays a small role in the highway program,where local governments play a large role in highway financing,and where the chief state transportation agency is a highwaydepartment rather than a department of transportation. The assignmentof responsibilities, then, appears to influence program performance.     

Geographic Politics in the U.S. House of Representatives: Coalition Building and Distribution of Benefits

This article argues that scholars need to consider the structure of House representation to better understand distributive politics. Because House districts (unlike states) are not administrative units in the federal system, House members cannot effectively claim credit for most grant-in-aid funds. Instead, their best credit-claiming opportunities lie in earmarked projects, a small fraction of federal grant dollars. As a consequence, I expect to find: (1) political factors have a much greater effect on the distribution of earmarked projects than on federal funds generally; and (2) project grants are a better support-building tool for coalition leaders than allocations to states. I test this argument with a study of the 1998 reauthorization of surface transportation programs and find strong support for both hypotheses .     

FINANCING THE WAR ON DRUGS: THE IMPACT OF LAW ENFORCEMENT GRANTS ON RACIAL DISPARITIES IN DRUG ARRESTS

This study estimates the impact of the discretionary Edward Byrne Memorial State and Local Law Enforcement Assistance Program (EBMGP) on drug arrests and crime. The 1986 and 1988 Anti‐Drug Abuse Act allocated federal funds to state and local municipalities to combat illicit drug use and violent crime associated with drug sales and trafficking. The results show that the implementation of the EBMGP resulted in an increase in police hiring, an increase in drug sales arrest rates for Blacks and Whites, and a decrease in total crime. Nonetheless, Black‐White racial disparity in the drug sales arrest rate still significantly increases by approximately 1 for every 1,000 Black residents. Our findings highlight the role of federal crime control policies in state and local policing. Although, the EBMGP was a color‐blind policy initiative, it was not race neutral in its implementation.     

Electronic Funds and Benefits Transfers,E‐Government,and the Winter Commission

This article examines how electronic funds transfers and electronic benefit transfers have become integral components of digital government. These technologies have forwarded many of the principles of the Winter Commission, including the development of lean, responsive government. The greater efficiency and cost savings for the federal and most state governments have not been achieved without encountering and dealing with serious matters related to customer service, contracting, collaboration, management, and implementation. These issues arise in the normal daily use of electronic payment technologies, but they are magnified in crisis situations, as demonstrated by disaster relief operations during Hurricane Katrina.