Formula Grants
Funding for the Largest Federal Assistance Programs Is Based on Census-Related Data and Other Factors Gao ID: GAO-10-263 December 15, 2009Many federal assistance programs are funded by formula grants that have historically relied at least in part on population data from the decennial census and related data to allocate funds. In June 2009, the Census Bureau reported that in fiscal year 2007 the federal government obligated over $446 billion through funding formulas that rely at least in part on census and related data. Funding for federal assistance programs continues to increase. Government Accountability Office (GAO) was asked to determine (1) how much the federal government obligates to the largest federal assistance programs based on the decennial census and related data, and how the Recovery Act changed that amount; and (2) what factors could affect the role of population in grant funding formulas. To answer these objectives, GAO identified the 10 largest federal assistance programs in each of the fiscal years 2008 and 2009 based on data from the President's fiscal year 2010 budget. GAO reviewed statutes, agency reports, and other sources to obtain illustrative examples of how different factors could affect the role of population data in grant funding.
GAO's analysis showed that each of the 10 largest federal assistance programs in fiscal years 2008 and 2009 relied at least in part on the decennial census and related data--that is, data from surveys with designs that depend on the decennial census, or statistics, such as per capita income, that are derived from these data. For fiscal year 2008, this totaled about $334.9 billion, representing about 73 percent of total federal assistance. For fiscal year 2009, the estimated obligations of the 10 largest federal assistance programs totaled about $478.3 billion, representing about 84 percent of total federal assistance. This amount included about $122.7 billion funded by the Recovery Act and about $355.6 billion funded by other means. Several factors can affect the role of population in grant funding formulas. When a formula includes variables in addition to total population, the role of population in the grant funding formula is less than if the formula relies solely on total population. All of the programs in GAO's review included one or more grants with formulas containing variables other than total population, such as the level of transit service provided. In addition, other factors can modify the amount that a state or local entity would have otherwise received under the formula. These factors include (1) hold harmless provisions and caps; (2) small state minimums; and (3) funding floors and ceilings. With the application of these factors, grant funding may be affected less or entirely unaffected by changes in population.
GAO-10-263, Formula Grants: Funding for the Largest Federal Assistance Programs Is Based on Census-Related Data and Other Factors
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
December 2009:
Formula Grants:
Funding for the Largest Federal Assistance Programs Is Based on Census-
Related Data and Other Factors:
GAO-10-263:
GAO Highlights:
Highlights of GAO-10-263, a report to congressional requesters.
Why GAO Did This Study:
Many federal assistance programs are funded by formula grants that have
historically relied at least in part on population data from the
decennial census and related data to allocate funds. In June 2009, the
Census Bureau reported that in fiscal year 2007 the federal government
obligated over $446 billion through funding formulas that rely at least
in part on census and related data. Funding for federal assistance
programs continues to increase.
GAO was asked to determine (1) how much the federal government
obligates to the largest federal assistance programs based on the
decennial census and related data, and how the Recovery Act changed
that amount; and (2) what factors could affect the role of population
in grant funding formulas. To answer these objectives, GAO identified
the 10 largest federal assistance programs in each of the fiscal years
2008 and 2009 based on data from the President‘s fiscal year 2010
budget. GAO reviewed statutes, agency reports, and other sources to
obtain illustrative examples of how different factors could affect the
role of population data in grant funding.
What GAO Found:
GAO‘s analysis showed that each of the 10 largest federal assistance
programs in fiscal years 2008 and 2009 relied at least in part on the
decennial census and related data”that is, data from surveys with
designs that depend on the decennial census, or statistics, such as per
capita income, that are derived from these data. For fiscal year 2008,
this totaled about $334.9 billion, representing about 73 percent of
total federal assistance. For fiscal year 2009, the estimated
obligations of the 10 largest federal assistance programs totaled about
$478.3 billion, representing about 84 percent of total federal
assistance. This amount included about $122.7 billion funded by the
Recovery Act and about $355.6 billion funded by other means.
Table: Fiscal Year 2009 Estimated Obligations for the 10 Largest
Federal Assistance Programs and Portion of Estimated Amount Obligated
Due to Recovery Act (Dollars in billions):
Program: Medicaid;
Estimated amount obligated: $266.6;
Estimated portion from Recovery Act: $36.7.
Program: Highway Planning and Construction;
Estimated amount obligated: $54.1; Estimated portion from Recovery Act:
$13.4.
Program: State Fiscal Stabilization Fund”Education State Grants;
Estimated amount obligated: $39.7;
Estimated portion from Recovery Act: $39.7.
Program: Title I Grants to Local Education Agencies;
Estimated amount obligated: $24.5;
Estimated portion from Recovery Act: $10.0.
Program: Individuals with Disabilities Education Act Part B;
Estimated amount obligated: $22.8;
Estimated portion from Recovery Act: $11.3.
Program: Temporary Aid for Needy Families;
Estimated amount obligated: $17.1;
Estimated portion from Recovery Act: $5.0.
Program: Section 8 Housing Choice Vouchers;
Estimated amount obligated: $16.6;
Estimated portion from Recovery Act: $0.0.
Program: Community Development Block Grant;
Estimated amount obligated: $13.3;
Estimated portion from Recovery Act: $1.0.
Program: Federal Transit Formula Grants Programs;
Estimated amount obligated: $13.0;
Estimated portion from Recovery Act: $5.6.
Program: Children‘s Health Insurance Program;
Estimated amount obligated: $10.6;
Estimated portion from Recovery Act: $0.0.
Program: Total;
Estimated amount obligated: $478.3;
Estimated portion from Recovery Act: $122.7.
Source: Office of Management and Budget (OMB), Analytical Perspectives,
Budget of the United States Government, Fiscal Year 2010 (May 2009),
Table 8-4, Summary of Programs by Agency, Bureau, and Program and Table
8-6, Summary of Recovery Act Grants by Agency, Bureau, and Program.
Note: Because the actual obligations for fiscal year 2009 are not yet
available from OMB for each of these programs, we are reporting the
estimated fiscal year 2009 obligations reported in the President‘s
Fiscal Year 2010 budget.
[End of table]
Several factors can affect the role of population in grant funding
formulas. When a formula includes variables in addition to total
population, the role of population in the grant funding formula is less
than if the formula relies solely on total population. All of the
programs in GAO‘s review included one or more grants with formulas
containing variables other than total population, such as the level of
transit service provided. In addition, other factors can modify the
amount that a state or local entity would have otherwise received under
the formula. These factors include (1) hold harmless provisions and
caps; (2) small state minimums; and (3) funding floors and ceilings.
With the application of these factors, grant funding may be affected
less or entirely unaffected by changes in population.
View [hyperlink, http://www.gao.gov/products/AO-10-263] or key
components. For more information, contact Robert Goldenkoff at (202)
512-2757 or goldenkoffr@gao.gov.
[End of section]
Contents:
Letter:
Background:
The Federal Government Obligated an Estimated $478 Billion in Fiscal
Year 2009 at Least in Part Based on Census and Related Data:
Several Factors Could Affect the Role of Population in Grant Funding
Formulas:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Descriptions of the Largest Federal Assistance Programs:
Appendix III: GAO Contact and Acknowledgments:
Related GAO Products:
Tables:
Table 1: Fiscal Year 2008 Obligations for the 10 Largest Federal
Assistance Programs:
Table 2: Fiscal Year 2009 Estimated Obligations for the 10 Largest
Federal Assistance Programs and Portion of Estimated Amount Obligated
due to the Recovery Act:
Abbreviations:
ACF: Administration of Children and Families:
ACS: American Community Survey:
CFDA: Catalog of Federal Domestic Assistance Programs:
CHIP: Children's Health Insurance Program:
CMS: Centers for Medicare & Medicaid Services:
CPS: Current Population Survey:
CRS: Congressional Research Service:
FMAP: Federal Matching Assistance Percentage:
FMR: Fair Market Rent:
IDEA: Individuals with Disabilities Education Act:
LEA: Local Educational Agency:
OMB: Office of Management and Budget:
TANF: Temporary Aid for Needy Families:
[End of section]
United States Government Accountability Office: Washington, DC 20548:
December 15, 2009:
The Honorable Thomas Carper:
Chairman:
Subcommittee on Federal Financial Management, Government Information,
Federal Services, and International Security:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable William Lacy Clay:
Chairman:
Subcommittee on Information Policy, Census, and National Archives:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Carolyn Maloney:
House of Representatives:
The federal government uses formula grants to determine funding amounts
for many of the largest federal assistance programs. These programs
provide funding for a variety of purposes, including health insurance
for low income families and individuals, improvement of highway and
public transportation systems, and special education programs. To
determine funding amounts, grant formulas have historically relied at
least in part on data from the decennial census and related data--that
is, data from surveys with designs that depend on the decennial census,
or statistics derived from these data sources. More than 10 years ago,
we reported that in fiscal year 1998 the federal government obligated
about $162 billion through 22 of the largest federal assistance
programs using formulas based at least in part on decennial census and
related data.[Footnote 1] In June 2009, the Census Bureau reported that
in fiscal year 2007 the federal government obligated over $446 billion
through funding formulas that rely at least in part on census and
related data.[Footnote 2] Funding for federal assistance programs
continues to increase. Of the $580 billion in additional federal
spending associated with the American Recovery and Reinvestment Act of
2009 (Recovery Act),[Footnote 3] the federal government obligated an
estimated $161 billion through federal grant programs for fiscal year
2009.
This report responds to your request that we determine (1) how much the
federal government obligates to the largest federal assistance programs
based on the decennial census and related data, and how the Recovery
Act changed that amount; and (2) what factors could affect the role of
population in grant funding formulas. To answer our objectives, we
identified 11 federal assistance programs representing the 10 largest
programs in each of the fiscal years 2008 and 2009 based on the dollar
amounts obligated reported in the President's fiscal year 2010 budget,
issued in May 2009, Office of Management and Budget (OMB), Analytical
Perspectives, Budget of the United States Government, Fiscal Year 2010
(Fiscal Year 2010 budget).[Footnote 4] We included the following
programs in our review:[Footnote 5]
* Children's Health Insurance Program (CHIP);
* Community Development Block Grant (CDBG) and Neighborhood
Stabilization Program;
* Education State Grants, State Fiscal Stabilization Fund (State Fiscal
Stabilization Fund);
* Federal Transit Formula Grants Programs;
* Head Start;
* Highway Planning and Construction;
* Individuals with Disabilities Education Act (IDEA), Part B;
* Medicaid;
* Section 8 Housing Choice Vouchers;
* Temporary Aid for Needy Families (TANF); and:
* Title I Grants to Local Education Agencies (Title I).
For a description of each of these programs, see appendix II. To
determine whether the programs' funding relied on census and related
data, we reviewed statutes, our prior work, the Catalog of Federal
Domestic Assistance Programs (CFDA),[Footnote 6] Congressional Research
Service reports, and agency Web pages and reports related to each of
the programs. We considered funding to be based on census or related
data if any part of the funding formula(s) or eligibility requirements
relied on these data sources. To determine what factors could affect
the role of population in grant funding formulas, we reviewed our prior
work (see the list of related GAO products at the end of this report)
and other research on formula grants.[Footnote 7] (See appendix I for a
more detailed discussion of our scope and methodology.)
We conducted our work from June 2009 to December 2009 in accordance
with all sections of GAO's Quality Assurance Framework that are
relevant to our objectives. The framework requires that we plan and
perform the engagement to obtain sufficient and appropriate evidence to
meet our stated objectives and to discuss any limitations in our work.
We believe that the information and data obtained, and the analysis
conducted, provide a reasonable basis for any findings and conclusions.
Background:
Congress appropriates federal assistance grant funds to executive
branch agencies that then use funding formulas to distribute federal
assistance to states or local entities.[Footnote 8] These funding
formulas are typically established through statute and expressed as one
or more equations containing one or more variables. Executive branch
agencies also use formulas to determine the amount of federal matching
grants for jointly funded federal assistance programs where the amount
of the federal match varies among the states based upon the formula
calculation. For example, Medicaid's Federal Matching Assistance
Percentage (FMAP) is determined through a statutory formula based on
each state's per capita income relative to U.S. per capita income.
[Footnote 9] Various statutory or administrative provisions can also
modify the amount that would otherwise be determined under the formula.
These provisions may be included to avoid disruptions that could be
caused by year-to-year changes in funding, to cover fixed costs of a
program, or for other reasons.
Congress can use formula grants to target funds to achieve federal
assistance program objectives by including specific variables in the
formulas that relate to the programs' objectives.[Footnote 10] For
example, for a program intended to serve a specific segment of the
population, the formula may contain variables that measure or identify
the subset of the population. Therefore, the formula for a program
designed to provide services for children in low income areas may
contain variables that identify the total number of children living in
poverty in a certain area.
Historically, many formulas have relied at least in part on decennial
census and related data as a source of these variables. The decennial
census collects, among other things, information on whether a residence
is owned or rented, as well as respondents' sex, age, and race. To
update decennial population counts, the Bureau's Population Estimates
Program produces population estimates for each year following the last
published decennial census, as well as for past decennials, using
administrative records such as birth and death certificates and federal
tax returns. Census-related data stem from the decennial census and the
Bureau's population estimates and include (1) surveys with statistical
samples designed to represent the entire population using data from the
decennial census or its annual updates, and (2) statistics derived from
decennial census data, its annual updates, or census-related surveys.
Two of the census-related surveys produced by the Bureau include the
American Community Survey (ACS) and the Current Population Survey
(CPS). The ACS is an annual survey of about 3 million housing units
that collects information about people and housing, including
information previously collected during the decennial census. The CPS
is a monthly survey of about 50,000 households conducted by the Census
Bureau for the Bureau of Labor Statistics and provides data on the
labor force characteristics of the U.S. population. Supplemental
questions also produce estimates on a variety of topics including
school enrollment, income, previous work experience, health, employee
benefits, and work schedules.
Federal agencies use census data, annual updates, and surveys based on
these data to produce other statistics used in federal assistance grant
formulas. For example, the Bureau of Economic Analysis produces per
capita income data--a derivative of decennial census data--by dividing
personal income by population obtained from census population
estimates. Per capita income is used to calculate Medicaid's FMAP.
Another derivative is Fair Market Rent (FMR) that the Department of
Housing and Urban Development calculates and uses to determine payment
standard amounts for the Section 8 Housing Choice Voucher Program. The
FMR for a particular area is based on decennial census data or other
surveys such as the ACS for the years between censuses.
The Federal Government Obligated an Estimated $478 Billion in Fiscal
Year 2009 at Least in Part Based on Census and Related Data:
Our analysis showed that each of the 10 largest federal assistance
programs in fiscal year 2008 and 2009 relied at least in part on
decennial census and related data to determine funding. For fiscal year
2008, this totaled about $334.9 billion, representing about 73 percent
of total federal assistance.[Footnote 11] We considered funding based
on decennial census and related data if any part of the funding formula
or eligibility requirements relied on these data sources.[Footnote 12]
Table 1 shows the fiscal year 2008 obligations for the 10 largest
federal assistance programs in that year.
Table 1: Fiscal Year 2008 Obligations for the 10 Largest Federal
Assistance Programs:
Program: Medicaid;
Amount obligated: $214.0 billion.
Program: Highway Planning and Construction;
Amount obligated: $37.4 billion.
Program: TANF;
Amount obligated: $17.0 billion.
Program: Section 8 Housing Choice Vouchers;
Amount obligated: $15.6 billion.
Program: Title I Grants to Local Education Agencies;
Amount obligated: $13.9 billion.
Program: IDEA Part B;
Amount obligated: $11.0 billion.
Program: Federal Transit Formula Grants Programs;
Amount obligated: $8.2 billion.
Program: Head Start;
Amount obligated: $6.9 billion.
Program: CHIP;
Amount obligated: $6.0 billion.
Program: CDBG and Neighborhood Stabilization Program;
Amount obligated: $4.9 billion.
Program: Total;
Amount obligated: $334.9 billion.
Source: OMB, Analytical Perspectives, Budget of the United States
Government, Fiscal Year 2010 (May 2009), Table 8-4, Summary of Programs
by Agency, Bureau and Program.
[End of table]
For fiscal year 2009, the estimated obligations of the 10 largest
federal assistance programs totaled about $478.3 billion, representing
about 84 percent of total federal assistance.[Footnote 13] This amount
included about $122.7 billion funded by the Recovery Act and about
$355.6 billion funded by other means. The 10 largest federal assistance
programs in fiscal year 2009 included a new program added by the
Recovery Act--the State Fiscal Stabilization Fund.[Footnote 14] Table 2
shows the fiscal year 2009 estimated obligations for the 10 largest
federal assistance programs and how much the Recovery Act increased
that amount.
Table 2: Fiscal Year 2009 Estimated Obligations for the 10 Largest
Federal Assistance Programs and Portion of Estimated Amount Obligated
due to the Recovery Act:
Program: Medicaid;
Estimated amount obligated: $266.6 billion;
Estimated portion from the Recovery Act: $36.7 billion.
Program: Highway Planning and Construction;
Estimated amount obligated: $54.1 billion;
Estimated portion from the Recovery Act: $13.4 billion.
Program: State Fiscal Stabilization Fund-Education State Grants;
Estimated amount obligated: $39.7 billion[B];
Estimated portion from the Recovery Act: $39.7 billion[B].
Program: Title I Grants to Local Education Agencies;
Estimated amount obligated: $24.5 billion;
Estimated portion from the Recovery Act: $10.0 billion.
Program: IDEA Part B;
Estimated amount obligated: $22.8 billion;
Estimated portion from the Recovery Act: $11.3 billion.
Program: TANF;
Estimated amount obligated: $17.1 billion;
Estimated portion from the Recovery Act: $5.0 billion.
Program: Section 8 Housing Choice Vouchers;
Estimated amount obligated: $16.6 billion;
Estimated portion from the Recovery Act: 0.0.
Program: CDBG and Neighborhood Stabilization Program;
Estimated amount obligated: $13.3 billion;
Estimated portion from the Recovery Act: $1.0 billion.
Program: Federal Transit Formula Grants Programs;
Estimated amount obligated: $13.0 billion;
Estimated portion from the Recovery Act: $5.6 billion[C].
Program: CHIP;
Estimated amount obligated: $10.6 billion;
Estimated portion from the Recovery Act: 0.0.
Program: Total;
Estimated amount obligated: $478.3 billion;
Estimated portion from the Recovery Act: $122.7 billion.
Source: OMB, Analytical Perspectives, Budget of the United States
Government, Fiscal Year 2010 (May 2009), Table 8-4, Summary of Programs
by Agency, Bureau and Program and Table 8-6, Summary of Recovery Act
Grants by Agency, Bureau, and Program.
Note: Because the actual obligations for fiscal year 2009 for each of
these programs are not yet available from OMB, we are reporting the
estimated fiscal year 2009 obligations reported in the President's
Fiscal Year 2010 budget.
[A] The amount shown may include small amounts of Medicaid increases
from the Recovery Act not directly related to increased FMAPs.
[B] The amount shown only includes Education State Grants and does not
include the Government Services part of the State Fiscal Stabilization
Fund.
[C] The estimated obligations are spread across multiple Federal
Transit Administration grant programs and may include funds not
allocated by formula.
[End of table]
Several Factors Could Affect the Role of Population in Grant Funding
Formulas:
Decennial census and related data play an important role in funding for
the largest federal assistance programs. However, changes in population
do not necessarily result in an increase or decrease in funding. Based
on our prior work and related research on formula grants, we identified
some of the factors that could affect the role of population grant
formulas. We found that factors related to the formula equation(s) and
those that modify the amount that a state or local entity would
otherwise receive under the formula could affect the role of population
in grant funding formulas. Further, the extent to which one particular
factor can affect the role of population in grant funding varied across
programs. Although at least one factor that could affect the role of
population in grant funding formulas was present in each program in our
review, the number and combination of factors varied across programs.
[Footnote 15] To illustrate how these factors can be used in formula
grant funding, we selected examples from the federal assistance
programs in our review. The examples presented below are illustrative
and do not necessarily indicate the relative importance of a factor
compared to the other factors present.
Variables Other Than Total Population Can Affect Role of Population in
Grant Funding Formulas:
All of the programs in our review included one or more grants with
formulas containing variables other than total population. Obviously,
absent other factors, funding based on these formulas will be affected
less by changes in population than those that rely solely on total
population. The State Fiscal Stabilization Fund formula is based on
total population and a subset of total population--states' shares of
individuals aged 5 to 24 relative to total population. The Federal
Transit Program grants for urbanized areas with populations of 200,000
are based on total population and variables related to the level of
transit service provided. TANF supplemental grants are awarded based on
a formula with multiple variables.[Footnote 16] According to the
Department of Health and Human Services's Administration of Children
and Families (ACF), which administers the program, supplemental grants
are awarded to states with exceptionally high population growth in the
early 1990s, historic welfare grants per poor person lower than 35
percent of the national average, or a combination of above average
population growth and below average historic welfare grants per poor
person. Medicaid's FMAP is based on a 3-year average of a state's per
capita income relative to U.S. per capita income with per capita income
defined as personal income divided by total population.[Footnote 17]
The FMAP is affected by both changes in population and personal income.
Because changes in population and personal income are not correlated,
the affect of a population change may be diminished or increased by a
change in personal income. Finally, because per capita is squared--that
is, multiplied by itself--in the formula, the affect of a population
change may be greater than if per capita income were not squared.
In addition to the number of variables, the number of equations can
also affect the role of population in grant funding formulas. Under
CDBG, metropolitan counties and cites are eligible for the greater of
the amounts calculated under two different equations. The variables in
the first equation are population, extent of poverty, and extent of
overcrowded housing. The variables in the second equation are
population growth lag,[Footnote 18] extent of poverty, and age of
housing. The use of the dual equation structure and the variables other
than population in each equation reduce the effect of population
changes on grant funding.
Some formulas also have base amounts that are set at the amount of
funding in a specified prior year and the remainder for funding is
calculated according to a formula. For programs with set base amounts,
only a portion of the funding might be affected by a change in
population. Because appropriation amounts can change from year to year,
the base amount portion of the grant will represent less of the total
grant amount if appropriations increase, making total grant funding
affected more by a change in population. When appropriations decrease,
the share of the overall funding subject to the formula is lower,
lessening the effect of a change in population on total funding.
Some programs we reviewed contained such base amounts in their funding
formula. Under IDEA Part B, generally each state first receives the
same amount it received for fiscal year 1999 for the program for
children aged 3 through 21, and, for the program for children aged 3
through 5, the amount the state received in fiscal year 1997. For the
remainder of the state's funding in a given year, (1) 85 percent is
based on the state's share of the 3 through 21 year old population for
the school-aged program, and the 3 through 5 year old population for
the preschool program and (2) 15 percent is based on the state's share
of those children living in poverty. In another example, the Head Start
program guarantees the same base amount as in the prior year. The
remainder of the funding is allocated to cost of living increases and
Indian and migrant and seasonal Head Start programs depending upon the
amount remaining. According to ACF, which administers Head Start, when
the increase in appropriation is large enough to allow for expansion of
Head Start, those funds are calculated based on the relative share of
children aged 3 and 4 living in poverty in each state.
Factors That Modify the Formula Amount Could Affect the Role of
Population in Grant Funding:
Some factors modify the amount that a state would otherwise receive
under the funding formula and could affect the role of population in
grant funding formulas.[Footnote 19] The factors include the following:
(1) hold harmless provisions and caps; (2) small state minimums; and
(3) funding floors and ceilings.
Hold Harmless Provisions/Caps: Hold harmless provisions and caps limit
the amount of a decrease or increase from a prior year's funding. Hold
harmless provisions guarantee that the grantee will receive no less
than a specified proportion of a previous year's funding. If a
population change resulted in a decrease in funding below a designated
amount, the hold harmless provision would raise the amount of funding
above what the grantee would otherwise have received under the formula
and the amount of the increase would be deducted from the funding
amounts of grantees not affected by the hold-harmless provision. Title
I includes a hold harmless provision guaranteeing the amount made
available to each local educational agency (LEA) not be less than from
85 to 95 percent of the previous fiscal year's funding, depending on
the LEA school age child poverty rate.
Similarly, caps--also known as "stop gains"--limit the size of an
annual increase as a proportion of a previous year's funding amount or
federal share. If a population change resulted in an increase in
funding above a certain amount, the cap would limit the effect of the
population change. Under IDEA Part B, no state's allocation is to
exceed the amount the state received under this section for the
preceding fiscal year multiplied by the sum of 1.5 percent and the
percentage increase in the amount appropriated under this section from
the preceding fiscal year.
Small-State Minimums: Small-state minimums guarantee that each state
will receive at least a specified amount or percentage of total
funding.[Footnote 20] These minimums can typically benefit smaller
states that would otherwise receive allocations below the minimum.
However, whether a state is considered "small" depends upon the program
and is not necessarily based directly on a state's population or
geographic size. Several components within the federal-aid highway
program contain such state minimums. For example, there is a statutory
0.5 percent state minimum on the annual apportionment from the Highway
Trust Fund to the Surface Transportation Program for states having less
than a specified threshold of qualifying roads, vehicle miles traveled
on those roads, and taxes paid into the fund.[Footnote 21] When states'
minimums are applied, grant funding formulas may be affected less by
changes in population.
Floors/Ceilings: Floors and ceilings are lower and upper limits placed
on the amount a state can receive under a formula. If a change in
population results in funding under the formula falling below the
floor, the state would be guaranteed the amount of the floor. If a
population change results in the state exceeding the ceiling, the state
could not receive more than the ceiling amount. The federal
government's share of Medicaid expenditures ranges from 50 percent
(floor) to 83 percent (ceiling).[Footnote 22] Although 1973 was the
most recent year that any state was affected by the ceiling, states
often benefit from the FMAP floor. In fiscal year 2009, 13 states
received the minimum 50 percent matching rate. In our 2003 report on
federal formula grant funding, we found that in 2002, under the
statutory formula, which is based on the ratio of a state's per capita
income relative to U.S. per capita income, Connecticut would have
received a 15 percent federal matching rate.[Footnote 23] Despite
Connecticut's relatively high per capita income--a calculation based in
part on population--Connecticut received a 50 percent federal match.
For Connecticut, in this particular year, the floor affected the role
of population in the amount of the federal match. Similarly, because
CHIP's matching formula is based on the Medicaid FMAP, CHIP's enhanced
FMAP is also affected by Medicaid's floor and ceiling.[Footnote 24] For
example, if a state was affected by the 50 percent floor, the state
would receive a matching percentage of 65 percent. As a result, funding
for states benefiting from the floor would be affected less by changes
in population.
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If you have any questions about this report please contact me at (202)
512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix III.
Signed by:
Robert Goldenkoff:
Director:
Strategic Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our objectives were to determine (1) how much the federal government
obligates to the largest federal assistance programs based on the
decennial census and related data and how the Recovery Act changed that
amount, and (2) what factors could affect the role of population in
grant funding formulas.
To answer our objectives, we identified 11 federal assistance programs
representing the 10 largest programs in each of the fiscal years 2008
and 2009 based on the dollar amounts obligated reported in the
President's budget, issued in May 2009, Office of Management and Budget
(OMB), Analytical Perspectives, Budget of the United States Government,
Fiscal Year 2010 (Fiscal Year 2010 budget), Table 8-4, Summary of
Programs by Agency, Bureau, and Program. We believe that these data are
sufficiently reliable for purposes of our review. We included the
following programs in our review:
* Children's Health Insurance Program;
* Community Development Block Grants and Neighborhood Stabilization
Program;
* Education State Grants, State Fiscal Stabilization Fund;
* Federal Transit Formula Grants Programs;
* Head Start;
* Highway Planning and Construction;
* Individuals with Disabilities Education Act, Part B;
* Medicaid;
* Section 8 Housing Choice Vouchers;
* Temporary Aid for Needy Families; and:
* Title I Grants to Local Education Agencies.[Footnote 25]
To determine whether the program's funding relied on decennial census
and related census data, we reviewed statutes, GAO reports, the Catalog
of Federal Domestic Assistance Programs (CFDA), Congressional Research
Service (CRS) reports, and agency Web pages and reports related to each
of the programs. For purposes of our analysis, we defined census and
related data as (1) data obtained from the decennial census and annual
updates, (2) census-related surveys--that is, those surveys that base
their samples on the decennial census; or (3) their derivatives--that
is, statistics produced from data contained in the decennial census or
a census-related survey. We considered funding to be based on census or
related data if any part of the funding formula or eligibility
requirements relied on these data sources. For the programs that relied
at least in part on census and related data, we summed the total
obligation amounts reported in the Fiscal Year 2010 budget, Table 8-4,
Summary of Programs by Agency, Bureau, and Program, as well as Table 8-
6, Summary of Recovery Act Grants by Agency, Bureau, and Program.
[Footnote 26] Because the actual obligations for fiscal year 2009 for
each of these programs are not yet available from OMB, we are reporting
the estimated fiscal year 2009 obligations reported in the Fiscal Year
2010 budget. We did not independently verify or assess the extent to
which an agency actually distributes funds according to the statutory
formula. We did not identify all possible uses of decennial census and
related data to fund the selected programs. We did not conduct any
simulations to determine the extent to which any particular variable
relied on the funding formula.
To determine what factors could affect the role of population in grant
funding formulas, from our prior work related to formula grants (see
the list of related GAO products at the end of this report) and other
research on formula grants,[Footnote 27] we first identified factors
that illustrate the different ways that such factors could affect the
amount of grant funding. To obtain illustrative examples of how the
factors are used in the selected programs, we reviewed statutes, GAO
reports, the CFDA, CRS reports, and agency Web pages and reports
related to each of the programs. We asked the responsible agencies to
confirm the accuracy of information being reported on the existence of
the factors in and descriptions of each program. We received responses
on each of the 11 programs. We did not identify all possible factors
that could affect the amount of grant funding. The presentation of
these factors is not intended to suggest that they are the most
important either generally, or to the specific programs listed here.
The number of times a factor or a program is cited in reported examples
does not indicate anything judgmental about the feature or the program.
The presence of a factor in statute does not indicate that a factor is
either significant or relevant to actual funding for the program.
We conducted our work from June 2009 to December 2009, in accordance
with all sections of GAO's Quality Assurance Framework that are
relevant to our objectives. The framework requires that we plan and
perform the engagement to obtain sufficient and appropriate evidence to
meet our stated objectives and to discuss any limitations in our work.
We believe that the information and data obtained, and the analysis
conducted, provide a reasonable basis for any findings and conclusions.
[End of section]
Appendix II: Descriptions of the Largest Federal Assistance Programs:
Children's Health Insurance Program (CHIP): CHIP is a federal-state
matching grant program administered by the Department of Health and
Human Services' Centers for Medicare & Medicaid Services (CMS). The
program provides funding for states to cover children (and in some
states pregnant women) who lack health insurance and whose families'
low to moderate income exceeds Medicaid eligibility levels. Each state
has a different federal match level based on the Medicaid Federal
Medical Assistance Percentage (FMAP), called the enhanced FMAP.
Community Development Block Grant (CDBG) program: The Department of
Housing and Urban Development provides CDBG funding to communities to
develop decent housing, suitable living environments, and economic
opportunities for people of low and moderate income. Funds are
distributed among communities using a formula based on indicators of
community development need.
Education State Grants, State Fiscal Stabilization Fund (State Fiscal
Stabilization Fund):[Footnote 28] The State Fiscal Stabilization Fund
program is a new one-time appropriation under the American Recovery and
Reinvestment Act of 2009. It is administered by the U.S. Department of
Education. The funds are intended to help (1) stabilize state and local
government budgets in order to minimize and avoid reductions in
education and other essential public services; (2) ensure that local
educational agencies and public institutions of higher education have
the resources to avert cuts and retain teachers and professors; and (3)
support the modernization, renovation, and repair of school and college
facilities. According to the Department of Education, states
participating in the program must provide a commitment to advance
essential education reforms to benefit students from early learning
through post-secondary education.
Federal Transit Formula Grants Programs: Administered by the Department
of Transportation's Federal Transit Administration, these grant
programs provide capital and operating assistance for public transit
systems. Three of the major formula federal assistance programs include
the following: (1) the Urbanized Area Formula Program, which makes
federal resources available to areas with populations of 50,000 or more
and to governors for transit capital and operating assistance and for
transportation related planning; (2) the Nonurbanized Area Formula
Program, which provides formula funding to states for the purpose of
supporting public transportation in areas with populations of less than
50,000; and (3) Capital Investment--Fixed Guideway Modernization
Program,[Footnote 29] which may be used for capital projects to
maintain, modernize, or improve fixed guideway systems.
Head Start: Head Start is administered by the Department of Health and
Human Services's Administration for Children and Families (ACF) and
provides grants directly to over 1,600 local agencies. Head Start
provides funds for early childhood development services to low-income
children and their families. These services include education, health,
nutrition, and social services to prepare children to enter
kindergarten and to improve the conditions necessary for their success
later in school and life.
Highway Planning and Construction: The Department of Transportation's
Federal Highway Administration (FHWA) administers the Highway Planning
and Construction Program, also known as the federal-aid highway
program. According to FHWA, the federal-aid highway program provides
federal financial resources and technical assistance to state and local
governments for planning, constructing, preserving, and improving
federal-aid eligible highways. The federal-aid eligible highway system
includes the National Highway System (NHS), a network of about 163,000
miles of roads that comprises only 4 percent of the nation's total
public road mileage, but carries approximately 45 percent of the
nation's highway traffic as well as an additional 1.1 million miles of
roads that are not on the NHS, but that are eligible for federal-aid.
Individuals with Disabilities Education Act (IDEA) Part B: The
Department of Education has responsibility for oversight of IDEA and
for ensuring that states are complying with the law. IDEA Part B grants
provide funding for special education and related services for children
and youth ages 3 to 21. IDEA Part B governs how states and public
agencies provide special education and related services to more than
6.5 million eligible children and youth with disabilities. To receive
IDEA Part B funding, states agree to comply with certain requirements
regarding appropriate special education and related services for
children with disabilities.
Medicaid: CMS provides federal oversight of state Medicaid programs.
Medicaid is a health insurance program jointly funded by the federal
government and the states. Generally, eligibility for Medicaid is
limited to low-income children, pregnant women, parents of dependent
children, the elderly, and people with disabilities. The federal
government's share of a state's expenditures for most Medicaid services
is called the Federal Medical Assistance Percentage (FMAP). Federal
Medicaid funding to states is not limited, provided the states
contribute their share of program expenditures.
Section 8 Housing Choice Vouchers: The Section 8 Housing Choice Voucher
Program is one of three key rental subsidy programs of the Department
of Housing and Urban Development. The program is administered by local
public housing agencies and provides rental vouchers to very low-income
families to obtain decent, safe, and affordable housing. Following the
discontinuation of funds for new construction of public housing and
project-based Section 8, the Section 8 Housing Choice Voucher program
has been the primary means of providing new rental assistance on a
large scale. The program currently serves over 2 million families.
Temporary Aid for Needy Families (TANF): TANF is administered by ACF
and provides funding to states through four grants--basic block,
supplemental, and two contingency (recession-related). These grants are
intended to: (1) provide assistance to needy families with children so
they can live in their own homes or relatives' homes; (2) end parents'
dependence on government benefits through work, job preparation, and
marriage; (3) reduce out-of-wedlock pregnancies; and (4) promote the
formation and maintenance of two-parent families.
Title I Grants to Local Education Agencies (LEA): Title I is
administered by the Department of Education and provides financial
assistance to LEAs that target funds to the schools with the highest
percentage of low-income families. Schools use Title I funds to provide
additional academic support and learning opportunities to help low-
achieving children master challenging curricula and meet state
standards in core academic subjects. Federal funds are currently
allocated through four statutory formulas that are based primarily on
census poverty estimates and the cost of education in each state, as
measured by each state's expenditure per elementary and secondary
student.
[End of section]
Appendix III: GAO Contact and Acknowledgments:
GAO Contact:
Robert Goldenkoff on (202) 512-2757 or at goldenkoffr@gao.gov:
Acknowledgments:
In addition to the individual named above, Ty Mitchell, Assistant
Director; Robert Dinkelmeyer; Gregory Dybalski; Amber G. Edwards;
Robert L. Gebhart; Lois Hanshaw; Andrea J. Levine; Victor J. Miller;
Melanie H. Papasian; and Tamara F. Stenzel made key contributions to
this report.
[End of section]
Related GAO Products:
Formula Grants: Census Data Are among Several Factors That Can Affect
Funding Allocations. [hyperlink,
http://www.gao.gov/products/GAO-09-832T]. Washington, D.C.: July 9,
2009.
2010 Census: Population Measures Are Important for Federal Funding
Allocations. [hyperlink, http://www.gao.gov/products/GAO-08-230T].
Washington, D.C.: October 27, 2007.
Community Development Block Grant Formula: Options for Improving the
Targeting of Funds. [hyperlink,
http://www.gao.gov/products/GAO-06-904T]. Washington, D.C.: June 27,
2006.
Federal Assistance: Illustrative Simulations of Using Statistical
Population Estimates for Reallocating Certain Federal Funding.
[hyperlink, http://www.gao.gov/products/GAO-06-567]. Washington, D.C.:
June 22, 2006.
Community Development Block Grant Formula: Targeting Assistance to High-
Need Communities Could Be Enhanced. [hyperlink,
http://www.gao.gov/products/GAO-05-622T]. Washington, D.C.: April 26,
2005.
Federal-Aid Highways: Trends, Effect on State Spending, and Options for
Future Program Design. [hyperlink,
http://www.gao.gov/products/GAO-04-802]. Washington, D.C.: August 31,
2004.
Medicaid Formula: Differences in Funding Ability among States Often Are
Widened. [hyperlink, http://www.gao.gov/products/GAO-03-620].
Washington, D.C.: July 10, 2003.
Formula Grants: 2000 Census Redistributes Federal Funding Among States.
[hyperlink, http://www.gao.gov/products/GAO-03-178]. Washington, D.C.:
February 24, 2003.
Title I Funding: Poor Children Benefit Though Funding Per Poor Child
Differs. [hyperlink, http://www.gao.gov/products/GAO-02-242].
Washington, D.C.: January 31, 2002.
Formula Grants: Effects of Adjusted Population Counts on Federal
Funding to States. [hyperlink,
http://www.gao.gov/products/GAO/HEHS-99-69]. Washington, D.C.: February
26, 1999.
Federal Grants: Design Improvements Could Help Federal Resources Go
Further. [hyperlink, http://www.gao.gov/products/GAO/AMID-97-7].
Washington, D.C.: December 18, 1996.
Block Grants: Characteristics, Experience, and Lessons Learned.
[hyperlink, http://www.gao.gov/products/GAO/HEHS-95-74]. Washington,
D.C.: February 9, 1995.
Formula Programs: Adjusted Census Data Would Redistribute Small
Percentage of Funds to States. [hyperlink,
http://www.gao.gov/products/GAO/GGD-92-12]. Washington, D.C.: November
7, 1991.
[End of section]
Footnotes:
[1] GAO, Formula Grants: Effects of Adjusted Population Counts on
Federal Funding to States, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-99-69] (Washington, D.C.: Feb. 26,
1999).
[2] Blumerman, L. M. and P. M. Vidal. 2009. Uses of Population and
Income Statistics in Federal Funds Distribution--With a Focus on Census
Bureau Data. Governments Division Report Series, Research Report #2009-
1. For that report, the authors identified 140 programs that use
population or income data or both as a factor in determining funding
amounts or eligibility criteria.
[3] Pub. L. No. 111-5, 123 Stat. 115 (Feb. 17, 2009).
[4] Because the actual obligations for fiscal year 2009 are not yet
available from OMB for each of these programs, we are reporting the
estimated fiscal year 2009 obligations reported in the President's
Fiscal Year 2010 budget.
[5] For purposes of this report, we refer to the programs as they are
identified in the President's Fiscal Year 2010 budget. Some of the
programs listed comprise multiple federal assistance grants programs.
[6] The General Services Administration and OMB's CFDA (available at
[hyperlink, http://www.CFDA.gov]) is a governmentwide compendium of
federal programs, projects, and activities that provide assistance or
benefits to the American public.
[7] National Research Council, Statistical Issues in Allocating Funds
by Formula (Panel on Formula Allocations), Thomas A. Louis, Thomas B.
Jabine, and Marisa A. Gerstein, editors, Committee on National
Statistics, Division of Behavioral and Social Sciences and Education,
the National Academies Press; Washington, DC: 2003.
[8] For purposes of this report, states include the District of
Columbia. Local entities can include local governments, local education
agencies, and entities under contract with the federal government.
[9] Matching grants may also be based on a fixed percentage of the
amount spent by the state. Highway Planning and Construction programs
have matching grants where the federal share is based on a percentage
of the total cost of the program.
[10] Program objectives may not always be met by funding formulas and
may be modified by provisions introduced in subsequent legislation.
[11] The percentage of total federal assistance spending was based on
the total amount of outlays for fiscal year 2008.
[12] The Bureau's June 2009 report on the uses of population and income
statistics found that in fiscal year 2007, the federal government
obligated over $446 billion through funding formulas that rely in part
on census population or income data or both. For that report, the
authors identified 140 programs that relied on these data. The authors
used obligation amounts for fiscal year 2007 reported in the CFDA.
[13] The percentage of total federal assistance spending was based on
the total amount of outlays for fiscal year 2009.
[14] With the addition of the State Fiscal Stabilization Fund-Education
State Grants, Head Start was not among the largest federal assistance
programs in fiscal year 2009.
[15] We did not assess the extent to which the factors affected the
particular programs in fiscal years 2008 and 2009.
[16] TANF supplemental grants are one of the program's four grant
programs.
[17] On February 25, 2009, Centers for Medicare & Medicaid Services
(CMS) increased FMAP grant awards to states, and states may claim
reimbursement for expenditures that occurred prior to the effective
date of the Recovery Act. Generally, for fiscal year 2009 through the
first quarter of fiscal year 2011, the increased FMAP, which is
calculated on a quarterly basis, provides for: (1) the maintenance of
states' prior year FMAPs; (2) a general across-the-board increase of
6.2 percentage points in states' FMAPs; and (3) a further increase to
the FMAPs for those states that have a qualifying increase in
unemployment rates.
[18] The Department of Housing and Urban Development defines growth lag
as the shortfall in population that a city or county has experienced
when comparing its current population to the population it would have
had if it grew like all metropolitan cities since 1960.
[19] These factors could also affect the role of other variables in the
funding formula.
[20] When a state receives an increase due to the application of the
minimum, the amount of the increase may be offset by a reduction in
amount received by the states not subject to the minimum.
[21] The Surface Transportation Program provides flexible funding that
may be used by states for federal-aid highway and related projects.
[22] The statute also sets a 70 percent matching rate for the District
of Columbia.
[23] GAO, Formula Grants: 2000 Census Redistributes Federal Funding
Among States, [hyperlink, http://www.gao.gov/products/GAO-03-178]
(Washington, D.C.: Feb. 24, 2003).
[24] CHIP's enhanced FMAP is its Medicaid FMAP increased by 30 percent
of the difference between 100 and the current FMAP for that year.
[25] In total, we reviewed 11 programs. The State Fiscal Stabilization
Fund, created by the Recovery Act, was one of the 10 largest federal
assistance programs in fiscal year 2009. With the addition of the State
Fiscal Stabilization Fund-Education State Grants, in fiscal year 2009,
Head Start--one of the 10 largest programs in fiscal year 2008--was not
one of the largest federal assistance programs in fiscal year 2009.
[26] Table 8-6, Summary of Recovery Act Grants by Agency, Bureau, and
Program was used for fiscal year 2009 estimated obligations only.
[27] National Research Council, Statistical Issues in Allocating Funds
by Formula (Panel on formula allocations), Thomas A. Louis, Thomas B.
Jabine, and Marisa A. Gerstein, editors, Committee on National
Statistics, Division of Behavioral and Social Sciences and Education,
the National Academies Press; Washington, D.C.: 2003.
[28] According to the Department of Education, the description that
follows applies to the entire State Fiscal Stabilization Fund--both
Education State Grants and Government Services funds.
[29] "Fixed guideway" refers to any transit service that uses exclusive
or controlled rights-of-way or rails, entirely or in part.
[End of section]
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