Appendix C
Sources of Information

In the course of its work, the Panel on Formula Allocations used many sources of information to obtain an overview of formula allocation programs and to explore pertinent features of specific programs. The panel focused primarily on programs of the U.S. federal government, but some attention was given to state-funded programs, especially aid to education, to programs in other countries (primarily Canada and Australia), and to international programs. In the last category, the panel looked at the system for determining dues payments by members of the United Nations, a system with many of the same features observed in formula-based programs for allocating funds.

This appendix describes the sources of information that we were able to identify and use. We hope this summary will be useful to others who have a general interest in the subject or are seeking information about specific programs. Formula allocation programs, and the processes involved in creating them, can be exceedingly complex. Often there may be only a few people who have a full understanding of their history and the manner in which the formulas operate. Therefore, it may be necessary to go to several sources to get the whole story.



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Statistical Issues in Allocating Funds by Formula Appendix C Sources of Information In the course of its work, the Panel on Formula Allocations used many sources of information to obtain an overview of formula allocation programs and to explore pertinent features of specific programs. The panel focused primarily on programs of the U.S. federal government, but some attention was given to state-funded programs, especially aid to education, to programs in other countries (primarily Canada and Australia), and to international programs. In the last category, the panel looked at the system for determining dues payments by members of the United Nations, a system with many of the same features observed in formula-based programs for allocating funds. This appendix describes the sources of information that we were able to identify and use. We hope this summary will be useful to others who have a general interest in the subject or are seeking information about specific programs. Formula allocation programs, and the processes involved in creating them, can be exceedingly complex. Often there may be only a few people who have a full understanding of their history and the manner in which the formulas operate. Therefore, it may be necessary to go to several sources to get the whole story.

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Statistical Issues in Allocating Funds by Formula U.S. FEDERAL PROGRAMS General-Purpose Sources Catalog of Federal Domestic Assistance The Catalog of Federal Domestic Assistance (CFDA) is a database of all federal programs available to various entities, including state and local governments, American Indian tribal governments, territories, organizations, and individuals. The catalog is compiled by the U.S. General Services Administration (GSA) and is updated biannually, in June and December. The entire catalog is available to the public at http://www.cfda.gov. The catalog was very useful to the panel as the basis for an overview of federal formula allocation programs and as a starting point for more intensive analysis of a subset of these programs. The programs in the CFDA are categorized by 15 types of assistance, of which Category A, “formula grants,” is the most pertinent to the panel’s work. The catalog describes the programs in Category A as “allocations of money to States or their subdivisions in accordance with distribution formulas prescribed by law or administrative regulation, for activities of a continuing nature not confined to a specific project.” The 2001 version lists 172 formula grant programs in Category A, funded by nearly every federal department and a wide range of agencies within the departments. Over the course of the panel’s work, GSA has reorganized this category, adding some programs from other classifications and removing a few that it determined did not fit the definition of formula grant. Also, in late 2001, GSA added a 2001 Formula Report to the CFDA web site, listing 161 programs with “assistance formulas.” That report includes several programs that are not listed in Category A. These were added to arrive at a count of 180 federal formula allocation programs for fiscal year 2000. For each program, the CFDA provides a description in standard format. Items for formula grant programs that were of special interest to the panel included: Program number and name Federal agency Authorization (identifies relevant legislation) Objectives Uses and use restrictions

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Statistical Issues in Allocating Funds by Formula Eligibility requirements Formula and matching requirements Obligations (estimated for current and next fiscal year; actual for previous fiscal year) Information contacts (including web site address) Earlier in its work, the staff developed a database to assist the Panel on Formula Allocations in its review of the statistical aspects of fund allocation formulas and procedures using the FY 1999 version of the CFDA. Data elements included: federal agency responsible for the program, functional areas (one or more of 20 categories used in the catalog), total obligations for FY 1999, and several identifiers, including a 5-digit identification number and the name, postal and e-mail addresses, and telephone number of a contact person in the federal agency responsible for the program. This database was used to prepare summary descriptive statistics of the number of programs and total obligations, classified by agency and functional area, and to provide a listing of programs by agency and one of programs in order by size (obligations). The amount of information about formulas and associated allocation procedures that is contained in the CFDA program descriptions is often quite limited, and anyone wanting more detailed information would need to use other sources, as discussed below. The catalog allows the user to approach the individual programs in a number of ways. Users can search by category, functional area, department, and agency, among others. This is useful but has its limits, since the site does not cross-reference. Most important, the individual program descriptions do not list the functional areas for the programs; users of the CFDA web site would have to search by functional area to categorize them in that way. In some instances when we contacted agencies to request more information about a program, we found that the contact information was not current. Initially, we found that a few of the programs listed in Category A were not really formula grant programs and, conversely, that a few formula grant programs had been classified in other categories.1 1   The director of the division of GSA that is responsible for the CFDA was very helpful in identifying the misclassified programs so that we could more accurately identify the set of programs that was of interest to the panel.

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Statistical Issues in Allocating Funds by Formula Formula Report to the Congress The Formula Report to the Congress, produced by GSA through 1999 in response to a congressional mandate, was a listing of all federal formula allocation programs, with more detailed information than that provided by the CFDA. However, in 1996 Congress conducted a review of all recurring reports it required from the executive branch. Most of the reports reviewed, including the Formula Report, were listed for termination effective December 1999, allowing a three-year period for members to review and revise the list. No objections to terminating the Formula Report were heard, and effective December 20, 1999, Public Law 98-169 was amended to delete the requirement for the report. Therefore, some information in the Formula Report, including obligations and contact information, may be dated and of limited use. The final report was published in 1999. The Formula Report had five sections. The first, the agency program index, categorized each program by U.S. department and federal agency. The applicant eligibility index listed each program by department and noted who is eligible to apply. Applicants included individuals, local and state governments, U.S. territories, Indian tribal governments, and nonprofit organizations. The report also grouped programs into functional categories and subcategories, similar to the CFDA functional areas. The program descriptions were detailed descriptions of each formula allocation program. The report concluded with an appendix listing the resource person for each program. Each program description provided the reader with a formula narrative, and some also included the mathematical structure of the formula, in addition to definitions of the formula components. This level of detail is very useful to anyone interested in the mechanisms of the individual formulas. In some cases, the program descriptions in the Formula Report contained a great deal more information about the individual programs and their formulas than the CFDA. For instance, the formula description for the Cooperative Extension Service (CFDA No. 10.500) included the entire formula narrative that appears in the legislation and a detailed mathematical rendering of the formula. Descriptions of the National School Lunch Program (10.555), and the Community Development Block Grants/ Entitlement Grants (14.218) provided similarly detailed information about the formulas for those programs. However, not all of the programs’ formulas were listed in such detail.

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Statistical Issues in Allocating Funds by Formula Federal Funds Information for States Federal Funds Information for States (FFIS) is a nonprofit data clearinghouse that gives states a facility to analyze data and help develop positions on legislation. Funded by the National Governors Association and the National Conference of State Legislators, it tracks approximately 230 grant programs that account for 90 to 95 percent of all funding that states receive from the federal government. The database defines programs in various ways, including function (agriculture, health, etc.); congressional committee; CFDA number; recipients (states, local government, other); discretionary or mandatory funds; and formula or competitive grant program. Since the primary mission of the clearinghouse is to track and report on the fiscal impact of federal budget and policy decisions on state budgets and programs, the database is not constructed around formula features and does not contain detailed information on program formulas. However, it will run alternative formula constructions for their sponsors by request. In addition to maintaining the program database, FFIS regularly reports on important grant-in-aid program issues through their Issue Briefs. These briefs analyze the state-by-state impact of program, formula, and data changes on grant-in-aid funding. They also publish The Billion Dollar Club Series, which focuses on the 44 federal grant-in-aid programs in the database that receive an appropriation exceeding $1 billion. Although FFIS is not specifically designed to provide detailed information about formulas, it can be a useful tool for research on formula allocation programs. Program-Specific Sources of Information To further its understanding of the statistical aspects of formula allocation procedures, the panel focused attention on a few of the larger federal programs and some others with unusual features. Federal agency officials responsible for several of these programs were invited to make presentations at panel meetings. In addition, the panel staff prepared program descriptions, using a standard format, for 12 programs, including the 10 largest in fiscal year 1999 and two others that had features of particular interest. Acquisition of detailed information about formulas and allocation procedures for these 12 programs required the use of several sources of

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Statistical Issues in Allocating Funds by Formula information in addition to the general-purpose sources described in the preceding section. Among the sources consulted were: Legislation. The legislation authorizing a formula allocation program often contains the formula to be used. Relevant legislation can be identified in the “Authorization” category of the CFDA program description. Sometimes the legislation also specifies the data sources to be used for specific formula elements. Occasionally the annual appropriations legislation will include provisions that affect the allocation process, such as a new hold-harmless procedure. Regulations. For some programs the specific allocation formula or the data sources used as inputs to the formulas have been developed or determined by the program agency, following general program goals and objectives specified in the authorizing legislation. The detailed formulas and procedures are normally published as federal regulations. Agency web sites. The program agencies’ web sites often provide extensive information about the programs, including the allocation formulas and procedures used, as well as links to other sources of information. Frequently they identify agency staff who can be contacted for more information. Web site addresses are included in the CFDA program descriptions. Agency documentation. Some agencies have prepared detailed materials about their formula programs. The Federal Highway Administration produces “Financing Federal-Aid Highways,” which describes the basic process by which federal highway funds are allocated. The U.S. Department of Labor offers “Grants to States for Costs of Administration of Unemployment Insurance Laws,” describing funding for administrative costs of state unemployment programs. Research reports. Several program agencies have sponsored research designed to evaluate and improve formula allocation procedures and the quality of input data. Some examples of research publications include a report from the Panel on Estimates of Poverty for Small Geographic Areas (National Research Council, 2000) for the Title I education program, the RAND Corporation report on the substance abuse and mental health block grant programs (Burnam et al., 1997), a Mathematica Policy Research report on the estimation of target populations for the WIC program (Schirm, 1995), and reports by the Urban Institute (Blumberg et al., 1993) and the JWK International Corporation (Ellett, 1978) on the Medicaid matching formula. In addition, there have been many informative

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Statistical Issues in Allocating Funds by Formula independent evaluations of funding formulas and allocation procedures by the General Accounting Office, the Congressional Research Service, and other organizations. STATE-FUNDED AID PROGRAMS Many programs allocate state funds to cities, counties, and other governmental units. The panel focused its attention on two states: California, for which we examined a wide variety of state aid programs (see Chapter 7), and New York, for which we focused on state aid to education (Kadamus, 2002). State aid to education is important because it covers nearly half the total cost of public elementary and secondary education, whereas only about 10 percent is covered by federal funding. One useful general-purpose source of information on state aid to education is the National Center for Education Statistics compendium, “Public School Finance Programs of the United States and Canada, 1998-99,” which is available only on a CD-ROM or via the Internet (http://nces.ed.gov/edfin/state_finance/StateFinancing.asp). Also informative were two reports produced by the National Research Council’s Committee on Education Finance (National Research Council, 1999a, 1999b). OTHER COUNTRIES AND INTERNATIONAL ORGANIZATIONS In the United States, the General Revenue Sharing program of the 1970s and 1980s represented an approach to intergovernmental financing sharply different from that now in force, with its multiplicity of federal grant programs, each targeting specific policy goals. Under general revenue sharing, unrestricted federal funds were allocated to nearly 39,000 local governmental units on the basis of a complex formula with elements representing need and fiscal capacity. Other countries, notably Canada, Australia, and the United Kingdom, have unrestricted revenue-sharing programs of long standing, and panel members considered it useful to review the main features of those programs. A paper on Canada’s equalization program, with its formula-based allocation of federal funds to seven provinces, was commissioned and presented at the panel’s fifth meeting (Taylor et al., 2002). Australia’s program of income tax sharing with its states was of particular interest because of the role played by the Commonwealth Grants Commission, a permanent body established to provide advice

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Statistical Issues in Allocating Funds by Formula to the Commonwealth about the principles and allocation procedures for these grants (for a detailed description of the Commission and its history, see Commonwealth Grants Commission, 1995). Useful references on recent trends in the United Kingdom’s formula allocation programs include Smith et al. (2001) and the discussion that follows it. The United Nations and other international organizations are also in the business of allocating resources to their constituents, national governments. The panel commissioned a paper, also presented at its fifth meeting, describing the evolution and current status of the UN’s scale of assessments (Suzara, 2002). As noted earlier, the assessments procedure turned out to have many of the same features observed in formula-based programs for allocating funds. REFERENCES Blumberg, L., J. Holahan, and M. Moon 1993 Options for Reforming the Medicaid Matching Formula. Washington, DC: The Urban Institute. Brown, P.S. 2002 Impact of Title I formula factors on school year 2000-01 state allocations. Journal of Official Statistics Special Issue (September):441-464. Burnam, M.A., P. Reuter, J.L. Adams, A.R. Palmer, K.E. Model, J.E. Rolph, J.Z. Heilbrunn, G.N. Marshall, D. McCaffrey, S.L. Wenzel, and R.C. Kessler 1997 Review and Evaluation of the Substance Abuse and Mental Health Services Block Grant Allotment Formula. RAND Drug Policy Research Center, MR-533-HHS. Santa Monica, CA: RAND. Commonwealth Grants Commission 1995 Equality in Diversity: History of the Commonwealth Grants Commission, 2nd ed. Canberra: Australian Government Publishing Service. Ellet, C. 1978 Analysis of the Federal Medical Assistance Percentage (FMAP) Formulas, Volume I: Executive Summary. Annandale, VA: JWK International Corporation. Kadamus, J.A. 2002 Formula allocation for schools: Historical perspective and lessons from New York State. Journal of Official Statistics Special Issue (September):465-480. National Research Council 1999a Making Money Matter: Financing America’s Schools. Committee on Education Finance. H.F. Ladd and J.S. Hansen, eds. Washington, DC: National Academy Press. 1999b Equity and Adequacy in Education Finance: Issues and Perspectives. Committee on Education Finance. H.F Ladd, R. Chalk, and J.S. Hansen, eds. Washington, DC: National Academy Press.

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Statistical Issues in Allocating Funds by Formula 2000 Small-Area Income and Poverty Estimates: Priorities for 2000 and Beyond. Panel on Estimates of Poverty for Small Geographic Areas. C.F. Citro and G. Kalton, eds. Committee on National Statistics, Division of Behavioral and Social Sciences and Education. Washington, DC: National Academy Press. Schirm, A.L. 1995 State Estimates of Infants and Children Income Eligible for the WIC Program in 1992. Washington, DC: PriceWaterhouseCoopers LLP. Smith, P.C., N. Rice, and R. Carr-Hill 2001 Capitation funding in the public sector. Journal of the Royal Statistical Society 164(2):217-257. Suzara, F.B. 2002 A study on the formulation of an assessments scale methodology: The United Nations experience in allocating budget expenditures among member states. Journal of Official Statistics Special Issue (September):481. Taylor, M., S. Keenan, and J. Carbonneau 2002 The Canadian Equalization Program. Journal of Official Statistics Special Issue (September):393-408.