Appendix D
Handbook on Fund Allocation Formulas and Processes

On several occasions the panel discussed its proposed activities with representatives from federal and state agencies, the legislative branch, and nongovernmental organizations. Development of a handbook that would provide an introduction to underlying concepts and practical considerations in the use of statistical formulas to allocate funds elicited considerable enthusiasm. The panel developed a table of contents for such a handbook; however, we did not have the resources to produce it.

As stated in our recommendations chapter, the panel sees that there is a need for such a handbook, which should be produced under the auspices of the Office of Management and Budget’s Office of Statistical Policy. The primary audience would be federal and state legislators and their staffs, but it should also be valuable to agency officials responsible for administration of fund allocation programs and to nongovernmental organizations with interests in these programs. It could also be an attractive component of graduate-level courses in public administration and finance.



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OCR for page 138
Statistical Issues in Allocating Funds by Formula Appendix D Handbook on Fund Allocation Formulas and Processes On several occasions the panel discussed its proposed activities with representatives from federal and state agencies, the legislative branch, and nongovernmental organizations. Development of a handbook that would provide an introduction to underlying concepts and practical considerations in the use of statistical formulas to allocate funds elicited considerable enthusiasm. The panel developed a table of contents for such a handbook; however, we did not have the resources to produce it. As stated in our recommendations chapter, the panel sees that there is a need for such a handbook, which should be produced under the auspices of the Office of Management and Budget’s Office of Statistical Policy. The primary audience would be federal and state legislators and their staffs, but it should also be valuable to agency officials responsible for administration of fund allocation programs and to nongovernmental organizations with interests in these programs. It could also be an attractive component of graduate-level courses in public administration and finance.

OCR for page 138
Statistical Issues in Allocating Funds by Formula PROPOSED TABLE OF CONTENTS 1. Introduction   1.1 Purposes and scope 1.2 Intended audience 1.3 Uses   1.3.1 Developing a new formula 1.3.2 Analyzing/revising an existing formula 1.3.3 Periodic evaluations 2. An overview of fund allocation programs   2.1 History and current status   2.1.1 An early example: The Morrill Act 2.1.2 General revenue sharing 2.1.3 A statistical summary of current federal programs 2.1.4 Formula allocations of state funds 2.1.5 International perspective 2.2 The parties involved   2.2.1 Congress 2.2.2 Program agencies 2.2.3 First-level recipients 2.2.4 Individual beneficiaries 2.2.5 Advocacy groups 2.3 Alternative approaches to fund allocation   2.3.1 Amounts specified in legislation 2.3.2 Specific formula in legislation 2.3.3 Goals in legislation; formula developed by program agency 2.4 Types of formula allocations   2.4.1 Single-pass, mathematical expressions 2.4.2 Iterative procedures 2.4.3 Matching and cost-sharing provisions 3. Program goals   3.1 Desired outcomes   3.1.1 Close the gap between need and effort 3.1.2 Treat equals equally 3.1.3 Encourage spending on targeted services 3.1.4 Fair treatment of communities 3.2 Target population 3.3 Services provided

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Statistical Issues in Allocating Funds by Formula 4. Basic features of formula allocation programs   4.1 Target allocation units   4.1.1 Multilevel allocations 4.2 Ultimate beneficiaries 4.3 Frequency and timing of disbursements 4.4 Provisions for administrative costs 4.5 Program rules 5. Components of allocation formulas   5.1 Measures of need   5.1.1 Workload 5.1.2 Geographic cost differentials 5.2 Measures of fiscal capacity 5.3 Measures of effort 5.4 Interactions among components 6. Special features of formula allocations   6.1 Thresholds and other eligibility criteria 6.2 Limits 6.3 Hold-harmless provisions and caps   6.3.1 Applied to total appropriation 6.3.2 Applied only to increase in appropriation 6.3.3 Moving averages as an alternative 6.4 Step functions 6.5 Bonuses and penalties 6.6 Interaction of special features with size of and changes in program appropriations 7. Data sources for estimating formula components   7.1 Decennial censuses 7.2 Household surveys 7.3 Other statistical programs 7.4 Administrative records   7.4.1 Aggregate data 7.4.2 Individual records, e.g., student record systems 7.5 Factors to consider in choosing data sources   7.5.1 Conceptual fit 7.5.2 Level of geographic detail available 7.5.3 Timeliness

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Statistical Issues in Allocating Funds by Formula     7.5.4 Quality 7.5.5 Costs of collecting new data or processing existing data 7.5.6 Susceptibility to “gaming” by recipients 7.6 Combining data sources to produce model-based estimates 7.7 Updating estimates 8. Operational considerations   8.1 Steps in developing a new formula   8.1.1 Identify program objectives 8.1.2 Decide which components to include 8.1.3 Decide which variables to use for each component 8.1.4 Decide on data sources and methods of estimation 8.1.5 Decide on special features, if any, to include in the allocation process 8.1.6 Use simulation techniques to evaluate alternative formulas and processes 8.2 Quality assurance procedures for annual allocations   8.2.1 Replication 8.2.2 Analysis of change from prior years 8.3 Evaluating an existing formula   8.3.1 The use of simulation techniques 8.3.2 Exploratory data analysis 9. Additional sources of information   9.1 General sources   9.1.1 Catalog of Federal Domestic Assistance 9.1.2 Formula Report to the Congress (discontinued) 9.1.3 Federal Funds Information for States 9.2 Program-specific sources   9.2.1 Legislation and regulations 9.2.2 Agency web sites and documentation 9.2.3 Research reports