National Academies Press: OpenBook

Statistical Issues in Allocating Funds by Formula (2003)

Chapter: Appendix D: Handbook on Fund Allocation Formulas and Processes

« Previous: Appendix C: Sources of Information
Suggested Citation:"Appendix D: Handbook on Fund Allocation Formulas and Processes." National Research Council. 2003. Statistical Issues in Allocating Funds by Formula. Washington, DC: The National Academies Press. doi: 10.17226/10580.
×

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.

Suggested Citation:"Appendix D: Handbook on Fund Allocation Formulas and Processes." National Research Council. 2003. Statistical Issues in Allocating Funds by Formula. Washington, DC: The National Academies Press. doi: 10.17226/10580.
×

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

Suggested Citation:"Appendix D: Handbook on Fund Allocation Formulas and Processes." National Research Council. 2003. Statistical Issues in Allocating Funds by Formula. Washington, DC: The National Academies Press. doi: 10.17226/10580.
×

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

Suggested Citation:"Appendix D: Handbook on Fund Allocation Formulas and Processes." National Research Council. 2003. Statistical Issues in Allocating Funds by Formula. Washington, DC: The National Academies Press. doi: 10.17226/10580.
×

 

 

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

Suggested Citation:"Appendix D: Handbook on Fund Allocation Formulas and Processes." National Research Council. 2003. Statistical Issues in Allocating Funds by Formula. Washington, DC: The National Academies Press. doi: 10.17226/10580.
×
Page 138
Suggested Citation:"Appendix D: Handbook on Fund Allocation Formulas and Processes." National Research Council. 2003. Statistical Issues in Allocating Funds by Formula. Washington, DC: The National Academies Press. doi: 10.17226/10580.
×
Page 139
Suggested Citation:"Appendix D: Handbook on Fund Allocation Formulas and Processes." National Research Council. 2003. Statistical Issues in Allocating Funds by Formula. Washington, DC: The National Academies Press. doi: 10.17226/10580.
×
Page 140
Suggested Citation:"Appendix D: Handbook on Fund Allocation Formulas and Processes." National Research Council. 2003. Statistical Issues in Allocating Funds by Formula. Washington, DC: The National Academies Press. doi: 10.17226/10580.
×
Page 141
Next: Appendix E: Participation in Panel Workshop and Meetings »
Statistical Issues in Allocating Funds by Formula Get This Book
×
Buy Paperback | $53.00 Buy Ebook | $42.99
MyNAP members save 10% online.
Login or Register to save!
Download Free PDF

In 2000, the federal government distributed over $260 billion of funding to state and local governments via 180 formula programs. These programs promote a wide spectrum of economic and social objectives, such as improving educational outcomes and increasing accessibility to medical care, and many are designed to compensate for differences in fiscal capacity that affect governments’ abilities to address identified needs. Large amounts of state revenues are also distributed through formula allocation programs to counties, cities, and other jurisdictions. Statistical Issues in Allocating Funds by Formula identifies key issues concerning the design and use of these formulas and advances recommendations for improving the process. In addition to the more narrow issues relating to formula design and input data, the book discusses broader issues created by the interaction of the political process and the use of formulas to allocate funds.

Statistical Issues in Allocating Funds by Formula is only up-to-date guide for policymakers who design fund allocation programs. Congress members who are crafting legislation for these programs and federal employees who are in charge of distributing the funds will find this book indispensable.

  1. ×

    Welcome to OpenBook!

    You're looking at OpenBook, NAP.edu's online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

    Do you want to take a quick tour of the OpenBook's features?

    No Thanks Take a Tour »
  2. ×

    Show this book's table of contents, where you can jump to any chapter by name.

    « Back Next »
  3. ×

    ...or use these buttons to go back to the previous chapter or skip to the next one.

    « Back Next »
  4. ×

    Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

    « Back Next »
  5. ×

    Switch between the Original Pages, where you can read the report as it appeared in print, and Text Pages for the web version, where you can highlight and search the text.

    « Back Next »
  6. ×

    To search the entire text of this book, type in your search term here and press Enter.

    « Back Next »
  7. ×

    Share a link to this book page on your preferred social network or via email.

    « Back Next »
  8. ×

    View our suggested citation for this chapter.

    « Back Next »
  9. ×

    Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

    « Back Next »
Stay Connected!