Article Review: Fiscal Federalism Assignment for Module 6: Week 6
Nicholas Merritt
Dr. William Bowen
Liberty University
PLCY 804-Summer 2022-Subterm B
June 19, 2022
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ANNOTATIONS
Collins, Brian K. and Brian J. Gerber. 2006. “Redistributive Policy and Devolution: Is State
Administration a Road Block (Grant) to Equitable Access to Federal Funds?” Journal of
Public Administration Research and Theory 16, no. 4: 613-632.
Block grants are funds are federal funds set aside for state programs. The broad scope
associated with the implementation of these funds and the equity and efficiency of block grants
require a thorough analysis. The main question posed by Collins and Gerber is whether or not the
block grant approach produces effective redistributive policy management. The question can be
approached from two sides, equity, and efficiency. How efficient is the program? This will tell us
that the block grants are being used to their optimal level. How equitable is the block grant
program? Does the population for which these funds were intended have fair access to them? The
equity question is the one Collins and Gerber set to find out in this article. To support their thesis,
the authors recognize the importance of contract management issues when implementing policy.
Once you have an understanding of this, you can deduce the second and third order of effects
with contract management. Contract management helps determine the target populations access
to funds, which in turn determine the redistributive nature of the block grant. Collins and Gerber
further their research by linking access to Federal block grants to transaction costs associated
with intergovernmental grant contracting. These supporting points lead to the central research
objective of “What explains variation in locals governments access to intergovernmental grants
within a larger block grant program”? Collins and Gerber find evidence to support variations in
local governments implementation of block funds, questioning equity in the program. Their
researched based evidence shows that access to block grants are a function of local government
administrative capacity and arenas of grant competition. These findings bring equity of the
program into question. The equity is not intentionally biased toward lower income households
though. Instead, evidence points to this lack of access as a part of low government capacity,
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which is indirectly linked to lower income households. In addition, the contracting system used
by the states to obtain and distribute these funds create a highly competitive environment.
Variations in this process combined with government capacity access to federal funds are
effected. The researchers highlight an egregious area in the block grant program. Fiscal
Federalism is the proper method to use with this program, but if the states do not do a sufficient
job in granting access to these funds for the people most in need, the program fails.
Pagano, Michael A. and Jocelyn M. Johnston. 2000. “Life at the Bottom of the Fiscal Food
Chain: Examining City and County Revenue Decisions.” Publius 30, no. 1: 159-170
This article examines the shifting of responsibility away from the federal and state
governments to local city and county governments. Specifically, Pagano and Johnston look at
how these smaller governments make revenue decisions associated with general federal funds for
new programs. With this shift of responsibility, the burden is placed on the local general-purpose
governments. Pagano and Johnston seek to examine how general-purpose governments respond
to the financial requirements that come from this burdensome shift by focusing on two fiscal
responses. The first response being the increasing of revenue burdens on the taxpayers, should
the governmental program required local governments to finance new services. The second
response would be drawing down the ending balances to come up with the funds. Pagano and
Johnston found that the amount of control a state has over local revenue authority has a direct
effect on the decisions that produce financial burdens on local residents. For example, the state
governments vary in degree on what constraints or limitations local governments have in revenue
raising. Whether it be a local option tax authority, or the ability for local governments to levy
income taxes, general-purpose governments are dependent on what the state government has
delegated them to do. Moreover, the local government’s ability to make sound revenue decisions
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is also impacted by intergovernmental aid. Higher levels of government aid are certainly
associated with reduced burdens on residents; however, this aid is generally provided to local
governments from the state. The issue lies with the equal dispersion of those funds to areas of
high resident revenue burdens. The researchers found that these facts support their claim that
lower-level government are put in fiscally difficult decisions and these decisions could become
more difficult in the event of an economic recession. I think that the researchers pose a valid
question in this article. Fiscal Federalism is an important and inevitable practice for all lower-
level governments. The way the sphere of power is established, it will eventually be on the
burden of these lower-level general-purpose governments to react to new or developing
programs. As such, they must be in a position to adequately adapt to devolution from the federal
government in funding the implementation of new programs.
SYNTHESIS
The determination of which functions and programs should be centralized or
decentralized in integral to the proper distribution of funds and the allocation of resources to
lower-level governments. When federal funds and programs are not implemented effectively the
problems are not addressed and resources are misused, which is an issue both of these articles
closely examine. Throughout my analysis of both articles, I examined the government’s fiscal
measures, both taxing and spending, and whether those measures had a negative or positive
effect. The articles provide support for the failure of the federal government’s fiscal measures on
sub-national governments, bringing to light the negative impact of those failures.
The Federal Block Grant Program is a program that provides a bevy of funding to aide
citizens most in need from housing to public services. Like most Fiscal Federalism polices, it is
executed poorly by the states and Collins and Gerber provide support for this. Extending
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flexibility to state governments is a critical component in Fiscal Federalism, but it can also be the
problem. Discontinued by the Obama Administration, the government utilized the Program
Assessment Rating Tool (PART) to assess the effectiveness of these programs. In large, the
review found that the programs were adequate or moderately effective at best. While in office,
President Office decreased the amount of funding for programs like the Community Services
Block Grant program and others. His reasoning behind this was that the current structure of these
programs does little to hold lower-level government agencies accountable for the lack of
outcome by these programs. Collins and Gerber cite this deficiency in their research on the
Community Development Block Grant Program.
Collins and Gerber note that the administrative capacity of local government is critical in
using these funds appropriately, but fail to do so by not ensuring those funds are distributed to
those most in need. From contract management to capacity insufficiencies lower level
governments do not effectivity use federal funds from Block Grants. Collins and Gerber show
this; and with the reduction of grant funds like the Community Services Block Grants, the federal
government knows it. The research done by Pagano and Johnston tell the same story only from a
different perspective. In my opinion their results show that Fiscal Federalism does more harm
than good. The federal government is so far disconnected from the process, issues like the one
identified by Pagano and Johnston are all but inevitable. Shifting financial responsibility from
federal and state governments to city and county government leaves the door open for
unequitable dispersion, and higher tax burdens. Taxes and fees implemented by lower-level
governments generally do not take into account lower-class residents, and intergovernmental aid
as pointed out by the researchers does little to mitigate it.
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Fiscal Federalism is not entirely negative, as Pagano and Johnston do provide evidence
that lower-level governments possess some capabilities in sound fiscal decisions with general
fund tax and fee revenue as proof. Although not a significant increase, the change in Cities’
ending balances from 1992-1997 improved. With these general fund ending balances, cities are
capable of handling additional service responsibilities at the behest of the federal government to
an extent. This small increase in balance is a good thing. It is important for all governments to
maintain a “rainy day” fund in case of extenuating circumstances, but if the balance were two
large, citizens would become concerned the government was taxing them too much. Of course,
the end balances are relative. Cities like New York or Chicago are going to have vastly different
end balances compared to smaller towns. For example in Dupage County Illinois, they had a
general reserve fund of 32% of their overall funds compared to 0.1% of Chicago’s general
reserves.
The cities much like the balances are also relative. This does not mean Chicago utilized
their government funds more effectively, or vice versa. Perhaps they have completely misused
those funds and are stuck with a next to zero balance. This argument all boils down to the fiscal
decisions the lower-level government makes. Although they may be capable of taking on
additional service responsibilities, it does not necessarily mean they will. This is the capability
Collins and Gerber examine in their study. The capability is there, but are attempts by lower level
governments to use federal funds the way they were intended done so equitably? The two articles
are in agreement that these governments certainly have the capability, but Collins and Gerber
show they do not have the capacity to do so. The lack of access to these Block Grants primarily
target lower income households whom are most in need. The capability is there, but governments
