Federal Funds

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Federal grants help pay for health care, highways, and other services. The federal government first made grants to states (for education) before the Constitution was adopted. Grants were expanded to include higher education in the 1860s and transportation in the 1920s. The heyday of federal grants, however, began in the 1950s with the Interstate Highway System and continued through the 1960s with programs associated with the Great Society, including health care, urban development, social services, and other efforts to combat poverty. There are now hundreds of federal grant programs for state and local governments. 

Federal funds provide both opportunities and challenges for Oklahoma and other states. On the positive side, they make it possible to provide more public services than we could on our own. Some of the state’s highest priorities–education, health care, and transportation–receive a significant share of funds from federal grants. The federal role in these programs helps ensure that residents of all fifty states receive roughly similar opportunities by reducing the disparities between wealthier and poorer states. Federal funding can also be used to ensure that minimum national standards are met across all states and to incentivize states to take actions in line with national priorities they might not otherwise take.

The assistance of the national government is particularly important in economic downturns, when assistance for unemployment, food and nutrition, health care and income support make a difference in the lives of the most vulnerable Oklahomans. Federal funds are often most important during a recession, when they cushion the impact of reduced state funding and services.  The American Recovery and Reinvestment Act, passed in 2009, was one important example. It provided additional funding for a number of social services, infrastructure, and education grants as well as general assistance to stabilize the state’s fiscal condition and avert deeper budget cuts. The impact of the recession would have been far greater without the injection of federal stimulus funds.

On the other hand, federal grants may be problematic for the states. The federal government imposes mandates, or binding responsibilities, on state and local governments without necessarily providing adequate funding. In addition, federal program requirements can be seen as onerous and may not reflect priorities in each of the states. While states can choose not to participate in federal grant programs, in practice it is hard to turn down federal money that a state’s taxpayers are contributing to.

The State of Oklahoma participates in over  300 different federal grant programs, according to the State Auditor and Inspector. In 2016, Oklahoma state and local governments received almost $7.5 billion in federal funding, according to the U.S. Department of the Census. State government received 94 percent of federal funds, with local governments receiving just 6 percent.

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