Special Analysis 11-03
May 12, 2011

The dramatic increase in the federal budget deficit in recent years has led federal lawmakers to look at options for reducing the deficit and debt to more sustainable levels. As part of this budget debate, federal block grants have reemerged as a way for the federal government to rein in spending. At the same time, many states have renewed their calls for additional flexibility in an effort to achieve better program results and gain more control over their budgets by reducing the state costs associated with federal programs.

The current fiscal environment is similar to 1996 when Congress converted a major open-ended entitlement program, Aid to Families with Dependent Children (AFDC), into the Temporary Assistance for Needy Families (TANF) block grant. As was the case in 1996, lawmakers are now considering converting major open-ended entitlement programs into block grants. Recent block grant proposals have emerged for Medicaid and the Supplemental Nutrition Assistance Program (SNAP).

This Special Analysis looks at the history of block grants, the funding associated with current block grants, and some of the major issues surrounding this type of federal aid to states.