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Capitol Hill’s Latest Fad: Federal Money With Few Strings Attached

January 16, 1995

WASHINGTON (AP) _ Would you turn down free money? No self-respecting governor would, either. That’s the allure of Washington’s current budget craze, called block grants.

Block grants replace narrowly targeted federal programs by channeling billions of dollars directly to states or cities, to be spent in broadly defined areas _ such as job training, education or children’s health _ with few strings attached.

Alas, few things in life are really free.

Often, when Congress gives states spending power, it also parcels out less money, leaving some state leaders feeling cheated. Governors and block grants: it’s sort of a love-hate relationship

``Most governors like them,″ said Raymond C. Scheppach, executive director of the National Governors’ Association. But, he added, ``There are risks.″

Block grants also pose risks for the federal government, because they mean giving up much of its control over how U.S. tax dollars are used.

Nevertheless, block grants are turning up in all sorts of proposals to trim the federal bureaucracy, from President Clinton’s to House Speaker Newt Gingrich’s.

Block grants aren’t a new idea. The first two came during the Johnson administration, at the urging of governors. President Nixon added three more. But it was President Reagan who embraced their potential as budget-cutting tools. Reagan folded 77 programs into nine block grants.

Cutting spending on a block grant in a single fell swoop is easier than waging a one-at-a-time fight to cut individual programs, each with its own lobbyists and supporters in Congress.

Now, with the Republicans in control of Congress and a renewed emphasis on balancing the budget, there is a rush to try block grants in ways unheard of in the past, to accomplish much deeper spending cuts.

``I think this year we will see a big jump in block grants,″ said Bruce McDowell, a research director at the Advisory Commission on Intergovernmental Relations. ``There is going to be competition between the administration and Congress to block up as many things as they can.″

There were 15 block grants in the 1993 federal budget, the most recent analysis available, McDowell said. They accounted for less than one-tenth of the $206 billion spent on some 600 federal grants that fiscal year.

Block grants included money to help the homeless, provide child care and job training for the poor, clean up neighborhoods, and build roads.

Last year, Congress combined about a dozen small crime-prevention programs into a new block grant at the behest of some moderate Republicans. Not long before that deal was cut, Gingrich had criticized such grants as a ``blank check″ to cities.

This year, hundreds of federal programs could be folded into mega-grants.

For example, the Department of Housing and Urban Development has proposed collapsing 60 of its programs into three block grants, handing off much of the agency’s power.

House Republicans, in their ``Contract With America,″ propose merging 10 federal nutrition programs _ including food stamps and free school lunches _ into a block grant to the states.

A group of Republican governors, led by Michigan’s John Engler, wants to go even further. The governors have asked Congress to convert 336 federal assistance programs, including the nation’s largest cash welfare program, into a handful of block grants.

This would be a dramatic change.

Currently, Aid to Families with Dependent Children and food stamps are entitlement programs, which means federal money is there to pay for anyone who qualifies. (States help decide who is eligible for AFDC and pay about 45 percent of the cost.)

Folding AFDC and food stamps into block grants would limit federal spending at a set amount. States might run out of grant money, even though more people need aid.

Supporters of the block grant proposal say it is the best way to stop runaway spending on welfare. They hope states will come up with new programs to replace a federal system that critics say creates a cycle of welfare dependency.

On the other side are those who believe there should be a national commitment to providing a safety net for poor children and the elderly.

For any block grant, the argument ultimately comes down to who can better run the programs in question _ states and cities or the U.S. government.

``When you think it through, there are some logical things the federal government ought to do, and some things it ought not do,″ said Charles L. Schultze, a senior fellow at Brookings Institution.

The trick is deciding which is which.

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