Statistical Issues in Allocating Funds by Formula (2003) / Chapter Skim
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Appendix B: A Review of Twelve Large Formula Allocation Programs
Appendix B: A Review of Twelve Large Formula Allocation Programs
Pages 100-128
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From page 100... ...
Table B-1 lists the 12 programs included in the analysis and shows their total obligations in FY 1999. Together, they account for FY 1999 obligations of $190.5 billion or 79.3 percent of total obligations for the 169 formula allocation programs listed in Category A of the Catalog of Federal Domestic Assistance in 2000.
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From page 104... ...
first 10 programs are those with the largest obligations in FY 1999. In addition, the substance abuse block grants program is discussed for its unique approach to equalizing fiscal capacity between states, as is EPA:s state capitalization grants program, one of the few with numerical values of shares specified in legislation.
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From page 105... ...
Another option would be to use the Treasury Department's indicator, total taxable resources, which is used for this purpose in the substance abuse and mental health block grant programs. · In recent years, the values of F
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From page 106... ...
Treasury for deficit reduction and for cleanup of leaking underground storage tanks. The highway trust fund is divided into two separate accounts: the highway account, which supports the federal aid highway program, and the mass transit account, which supports the federal transit formula grants program.
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From page 107... ...
Unlike the Medicaid program, the highway program has no provisions that attempt to equalize fiscal capacity among states. · The legislation that reauthorized the program for FY 1998 to 2003 contains a table of state percentages adding to 100 percent, with a provision that for FY 1998 each state's apportionments over a specified set of subprograms, as a percent of such apportionments to all states, should equal the value shown in the table.
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From page 108... ...
The AFDC program, which matched state expenditures at a rate determined by the FMAP formula, was by far the largest of the three programs replaced, thus the amounts of TANF block grants depended indirectly on the FMAP formula. Therefore, to the extent that the use of FMAP reduced differences in fiscal capacity between states, it can be said that the TANF block grants also did this.
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From page 109... ...
For example, to be eligible for a concentration grant, the estimated number of eligible children for a school district must be at least 6,500, or it must exceed 15 percent of the total estimated schoolage population. · In recent years, current estimates of number of eligible children by school district have been developed and updated biennially by the Census Bureau, with a model-based estimation procedure using data from the decennial census, the Current Population Survey, and administrative sources.
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From page 110... ...
· The special prices for Alaska and Hawaii established by legislation call attention to the fact that the Bureau of Labor Statistics does not produce state-level consumer price indices, so that price variations between states cannot be routinely included in allocation formulas. Special Education Grants to States · When this program was initiated by the Education for All Handicapped Children Act in 1975, annual allocations to the states were based on their certified counts of individuals being served under their programs, that is, a measure of effort.
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From page 111... ...
Such provisions may also create incentives for states to refrain from increasing the mandated age ranges for coverage by their programs, or even to reduce them. · No state may receive more than an amount equal to the number of its children receiving special education services multiplied by 40 percent of the average per-pupil expenditure in U.S.
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From page 112... ...
· Estimates, by state, ofthe population components of need are threeyear moving averages derived from the Current Population Survey. Because of concerns about the high variability of state estimates used as inputs to the allocation formula, Congress appropriated $10,000,000 annually, starting in FY 2000, to expand the Current Population Survey sample to improve reliability.
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From page 113... ...
Community Development Block Grants, Entitlement Grants Program · The stated objectives of the grants provided by this program are 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. Of the total annual appropriation, 70 percent is allocated to metropolitan cities and urban counties (entitlement areas)
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From page 114... ...
The definitions of the metropolitan cities and urban counties are revised by the Statistical Policy Office of the Office of Management and Budget after each decennial census. Close attention is given to this process by jurisdictions that are "on the bubble" for qualifying as entitlement areas.
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From page 115... ...
Proxy measures of need used in the current allocation formula have focused on persons ages 18 to 24, especially in urban areas, presumably because they were considered to be at highest risk for substance abuse. However, an analysis of data on substance abuse (including both drugs and alcohol)
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From page 116... ...
Needs for projects in several eligible categories are determined by periodic clean water needs surveys conducted by EPA. Initially funds allocated to the states were used to pay for specific projects, but starting with FY 1988, pursuant to 1987 amendments to the Clean Water Act, the funds have been used to establish clean water state revolving funds, which are loaned to localities for projects.
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From page 117... ...
For population elements in the formula for the special education program, the legislation specifies the most recent data satisfactory to the secretary of education. Two of the 12 programs reviewed, highways and EPA state capitalization grants, had numerical values of state shares (proportions)
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From page 118... ...
When equalization is a goal, per capita income is normally used as a measure of fiscal capacity, the only alternative in U.S. federal programs being the Treasury Department's measure of total taxable resources by state, which is used in the substance abuse block grants program.6 Of the 12 programs reviewed, 4 had equalization provisions; for 3 of these 4 programs, the provisions operate by providing for varying "match rates," that is, the proportions of states' expenditures that are reimbursed by the federal government.
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From page 119... ...
The special education program uses the mean of two population estimates: the number of persons in the age range served by each state's program and the number of poor children in those age ranges. The federal-aid highway program, in its national highway system subprogram, uses lane miles on principal arterial highways divided by population as one of four indicators of need.
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From page 120... ...
The SCHIP allocation formula includes a cost factor based on mean annual wages in the health services industry by state. The formula for the substance abuse block grants program has a more complex cost factor, with elements representing the costs of rents, services, and supplies.
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From page 121... ...
for state i, with Mj = EiMij wj is the weight for the jth measure of need, with A w j = 1 A similar approach, which could be called "weighted average of shares," is used to combine elements of need in the alternative allocation formulas for the community development block grant program. However, other programs, including special education and SCHIP, use a "share of weighted averages" approach to accomplish the same purpose: A./A = as.
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From page 122... ...
Unexpected or unpredictable declines in federal program funding can cause difficulties for state and local program administrators, for example, school officials planning their budgets for the coming school year. Still, most fund allocation programs are designed to meet fairly specific needs and to equalize, at least in part, the fiscal capacity of states to meet those needs.
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From page 123... ...
Prior to the introduction of a 100 percent hold-harmless provision in the Title I education program, the legislation covering basic grants included a partial hold-harmless provision based on a step function, with higher rates for jurisdictions with higher poverty. Areas with 30 percent or more poor school-age children were guaranteed at least 95 percent of the prior year's grant; areas with 15-30 percent poor school-age children were guaranteed 90 percent; and those with fewer than 15 percent poor school-age fin some instances, the total amount available may be insufficient to meet the holdharmless guarantee; in such cases allocations to all participants are "ratably reduced" to add to the total available funds.
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From page 124... ...
The special education program allocation rules ensure that as long as there is an increase in funds compared with the preceding fiscal year, no state may receive less than its allocation for that year. Additional provisions ensure that states will receive some minimum proportion of any increase in the amount appropriated for the current fiscal year.
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From page 125... ...
The highway and EPA state capitalization grants programs each guarantee a minimum share of 0.5 percent to every state, and the substance abuse block grants program guarantees a minimum of 0.375 percent. The specification of the state minimum for basic grants in the Title I education program is not quite so simple.
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From page 126... ...
Target Allocation Units Ofthe 12 federal funds allocation programs reviewed, 10 allocate funds to states, often with special provisions for allocations to territories and American Indian tribes. The exceptions are the Title I education and community development block grants programs.
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From page 127... ...
Data Inputs Provided by Recipients Much of the data for states and other areas that are used in allocation formulas comes from the Bureau of the Census and other federal statistical agencies, for example, the Bureau of Economic Analysis and the Bureau of Labor Statistics, or program agencies, for example, the Internal Revenue Service. However, for several fund allocation programs, data for important formula elements are compiled and provided by the same state agencies that operate the programs that the federal grants are intended to support.
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From page 128... ...
Several of the subprograms in the highway program use formulas with elements, such as lane miles and vehicle miles, for which data are provided by the states. In the Title I education program, the data on per pupil expenditures are reported by the states to the U.S.
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