states go to various state agencies, such as state transportation agencies for highway programs and state education agencies for the special education program; these agencies use the funds for purposes defined by program rules.

There are some exceptions to the usual pattern of making the initial distribution to state agencies. For the Title I education program, through school year 1996-1997, funds were allocated to state education agencies and those agencies were responsible for determining the amounts to be distributed to counties and school districts. For school year 1997-1998, however, Congress decided that allocations down to the county level were to be determined by the U.S. Department of Education, and starting with school year 1999-2000 the federal responsibility for allocations was extended to the school district level. Thus, in this program, school districts are now the target allocation units.1

Another exception occurs in the community development block grants program, which is administered by the U.S. Department of Housing and Urban Development. Most of the appropriated funds are distributed directly to 860 metropolitan cities and 153 urban counties (counts for FY 2001) for their use in programs designed to develop viable urban communities by providing decent housing and a suitable living environment and by expanding economic opportunities, principally for people with low and moderate incomes.


For many formula allocation programs, the ultimate beneficiaries are eligible individuals or family units who receive cash or in-kind benefits or services. Of the 12 programs reviewed in Appendix B, 7 fall into this category: Medicaid, Temporary Assistance for Needy Families (TANF), the school lunch program, special education, State Children’s Health Insurance Program (SCHIP), foster care, and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). For all of those seven except special education, eligibility is restricted to low-income families or


An exception was made for school districts with less than 20,000 population. States are permitted to aggregate the funds allocated to such districts and to reallocate them based on alternative criteria, subject to review by the Department of Education.

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