One example of a federal grant-in-aid program was a program established by the Social Security Act of 1935. The program gave money to states to train public health personnel and maintain public health services within their local counties. The Partnership in Health Act of 1966 also established a federal grant-in-aid program that offered block grants to fund state and county health activities, such as dental health services and tuberculosis control. The national Medicaid program is a very well-known federal grant-in-aid program, and it is the largest of the federal grant-in-aid programs given to states. While Medicaid is administered by individual states, the federal government provides the funding. The purpose of the program is to help eligible individuals access a broad range of medical services.
How Does a Federal Grant-in Aid-Work?
Both state and federal governments can offer grants-in-aid to provide funding for initiatives that are in the public interest. However, federal grants-in-aid are specifically authorized by the U.S. Federal Government, and they could be authorized by acts of law, such as the Social Security Act of 1935. The federal government generally sets specific requirements for states, individuals, or organizations that receive grant-in-aid funding. For example, as a condition of receiving federal Medicaid funding, states are required to ensure Medicaid covers specific services and serves populations that are considered low-income, living below a certain income threshold. The federal government also determines how much money a grant-in-aid will provide. For the Medicaid grant-in-aid program, for example, the federal funding provided is called the Federal Financial Participation (FFP). Each state’s FFP is determined by a formula based on per capita income in each state, as well as the extent of medical services the state provides to its qualifying residents. The Federal government pays a minimum of at least half of Medicaid’s total program cost in every state.
Alternatives to Federal Grants-in-Aid
Federal grants-in-aid are just one of many types of federal financial assistance awarded to states and select organizations. Others include:
Cooperative agreements: These are legal instruments used to transfer something of value from the federal government to a non-federal entity for purposes of carrying out a public purpose. Direct appropriations: Direct delivery of specific federal funds budgeted for a particular purpose, often only available for a limited period of time. Food commodities: This includes fresh foods, shelf-stable products, and prepared meals that the federal government distributes to eligible individuals. Loans: This refers to a loan issued by the government for a specific purpose, such as helping students pay for school. Unlike grants-in-aid, loans must be repaid. Loan guarantees: Loan guarantees are contractual obligations the government enters into with private lenders in order to encourage lenders to make financing available in situations where lenders may otherwise be unwilling to do so. The government agrees to protect the lender against losses in the event of borrower default, therefore sharing the risk of the loan.
