The Administration of Federal Grants to States

By V. O. Key Jr. | Go to book overview

CHAPTER XII
CONCLUSIONS

HE GRANT-IN-AID in a federal system may have a variety of objectives. Frequently the functions of government are so divided between the central government and the constituent units of the federation that one or the other does not possess adequate revenues to perform its constitutionally assigned duties. Generally the central government is in a superior financial position, and through grants it may make adjustments in the distribution of revenues to enable the federating units to perform their duties. Such grants are usually unconditional: the recipient government may use them for whatever governmental purposes it deems desirable within its jurisdiction. With the exception of relatively unimportant payments in the nature of shared revenues, this sort of grant has not been used in the United States.1 The American system of grants has had important effects on the federal-state fiscal system, but incidentally rather than by design.

The grant-in-aid may be provided to promote the conduct of a well- established, definite activity, yet it may not be followed by effective central supervision. The only central control exercised may be to see that the grant is used for the broadly defined purposes for which it has been made available. Such a grant without matching conditions would incidentally constitute an adjustment of the distribution of fiscal resources between the national government and the states. Yet it would be without significant influence on the nature of the operations within the states. An example of this sort of grant is one recently proposed to aid education,2 whereby grants would be made to the states "to be used by them for improvement of their public schools in the manner prescribed by their respective legislatures"; the definition of "public schools" was to be left to the states. It is doubtful, however, whether it is possible to finance a particular activity without defining what is to be financed.

____________________
1
On the use of the unconditional grant in Canada, see J. A. Maxwell, Federal Subsidies to the Provincial Governments in Canada ( 1937). See also, B. P. Adarkar, The Principles and Problems of Federal Finance ( 1933).
2
S. 419, 75th Cong., 1st sess.

-367-

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