Discretionary Spending

Multiple Budget Functions

Eliminate or Reduce Funding for Certain Grants to State and Local Governments

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017-2021 2017-2026
    Eliminate Department of Energy Grants for Energy Conservation and Weatherization
Change in Spending                        
  Budget authority 0 -0.3 -0.3 -0.3 -0.3 -0.3 -0.3 -0.3 -0.3 -0.3 -1.1 -2.7
  Outlays 0 -0.1 -0.1 -0.2 -0.3 -0.3 -0.3 -0.3 -0.3 -0.3 -0.7 -2.2
                           
    Phase Out Environmental Protection Agency Grants for Wastewater and Drinking Water Infrastructure
Change in Spending                        
  Budget authority 0 -0.6 -1.2 -2.4 -2.4 -2.5 -2.5 -2.6 -2.6 -2.7 -6.6 -19.5
  Outlays 0 * -0.2 -0.5 -1.1 -1.6 -2.0 -2.2 -2.3 -2.4 -1.8 -12.3
                           
    Eliminate New Funding for Community Development Block Grants
Change in Spending                        
  Budget authority 0 -3.2 -3.2 -3.3 -3.4 -3.4 -3.5 -3.6 -3.6 -3.7 -13.0 -30.8
  Outlays 0 * -0.7 -2.3 -3.0 -3.2 -3.3 -3.4 -3.5 -3.5 -6.1 -23.0
                           
    Eliminate Certain Department of Education Grants
Change in Spending                        
  Budget authority 0 -1.5 -1.6 -1.7 -1.8 -2.0 -2.2 -2.5 -3.0 -3.6 -6.5 -19.8
  Outlays 0 * -0.9 -1.4 -1.6 -1.7 -1.9 -2.1 -2.4 -2.8 -3.9 -14.9
                           
    Decrease Funding for Certain Department of Justice Grants
Change in Spending                        
  Budget authority 0 -0.5 -0.5 -0.6 -0.6 -0.6 -0.6 -0.6 -0.6 -0.6 -2.2 -5.2
  Outlays 0 -0.1 -0.3 -0.4 -0.5 -0.6 -0.6 -0.6 -0.6 -0.6 -1.2 -4.2
                           
    Total
Change in Spending                        
  Budget authority 0 -6.0 -6.8 -8.2 -8.4 -8.8 -9.1 -9.6 -10.2 -10.9 -29.4 -78.0
  Outlays 0 -0.2 -2.2 -4.8 -6.4 -7.4 -8.1 -8.6 -9.1 -9.6 -13.7 -56.5

This option would take effect in October 2017.

* = between –$50 million and zero.

The federal government provided $624 billion in grants to state and local governments in 2015. Those grants redistribute resources among communities around the country, finance local projects that may have national benefits, encourage policy experimentation by state and local governments, and promote national priorities. Although federal grants to state and local governments fund a wide variety of programs, spending is concentrated in the areas of health care, income security, education, and transportation. The conditions that accompany those federal funds vary substantially: Some grant programs give state and local governments broad flexibility in spending federal funds, whereas others impose more stringent conditions.

This option would reduce or eliminate funding for a group of grants. Specifically, it would make the following changes:

  • Eliminate new funding for the Department of Energy’s grants for energy conservation and weatherization, saving $2 billion between 2018 and 2026;
  • Phase out grants from the Environmental Protection Agency for wastewater and drinking water infrastructure over three years, reducing outlays by $12 billion between 2018 and 2026;
  • Eliminate new funding for the Community Development Block Grant program, saving $23 billion from 2018 to 2026;
  • Eliminate Department of Education grants that fund nonacademic programs that address the physical, emotional, and social well-being of students, reducing federal outlays by $15 billion between 2018 and 2026; and
  • Decrease funding for certain Department of Justice grants to nonprofit community organizations and state and local law enforcement agencies by 25 percent in relation to such funding in the Congressional Budget Office’s baseline, reducing spending by $4 billion from 2018 through 2026. (Those grants fund various activities, including the purchase of equipment for law enforcement officers, the improvement of forensic activities, substance abuse treatment for prisoners, Boys and Girls Clubs, and research and data collection for justice programs and the judiciary.)

If all of those reductions were put in place, federal spending would be reduced by $57 billion from 2018 through 2026. (More details on the individual grant programs appear in similar options presented in CBO’s March 2011 version of this volume.)

The main argument for this option is that the concerns that those grant programs address are primarily local, so leaving it to state and local governments to decide whether to continue to pay for the programs would lead to a more efficient allocation of resources. According to that reasoning, if state and local governments had to bear the full costs of those activities, they might be more careful in weighing those costs against potential benefits when making spending decisions. In addition, federal funding may not always provide a net increase in spending for those activities because state and local governments may reduce their own funding of such programs in response to the availability of federal funds.

One argument against this option is that those grants support programs that the federal government prioritizes but that state and local governments may lack the incentive or funding to promote to the extent desirable from a national perspective. In fact, many state and local governments face fiscal constraints that might make it difficult for them to compensate for the loss of federal funds. In addition, reducing funding for grants that redistribute resources across jurisdictions could lead to more persistent inequities among communities or individuals. Less federal support could also limit the federal government’s ability to encourage experimentation and innovation at the state and local level and to learn from the different approaches taken to address a given policy issue.