November 13, 2013
OPTIONS FOR REDUCING THE DEFICIT: 2014 TO 2023

Discretionary SpendingOption 28

270 - Energy

Eliminate or Reduce Funding for Certain Grants to State and Local Governments

(Billions of dollars) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014-2018 2014-2023
    Eliminate Department of Energy Grants for Energy Conservation and Weatherization
Change in Spending                        
  Budget authority 0 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.8 -2.0
  Outlays 0 -0.1 -0.1 -0.1 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.5 -1.5
                           
    Phase Out Environmental Protection Agency Grants for Wastewater and Drinking Water Infrastructure
Change in Spending                        
  Budget authority 0 -0.2 -1.2 -2.5 -2.6 -2.6 -2.7 -2.8 -2.8 -2.9 -6.6 -20.4
  Outlays 0 * -0.1 -0.4 -1.1 -1.7 -2.2 -2.4 -2.5 -2.6 -1.7 -13.0
                           
    Eliminate New Funding for Community Development Block Grants
Change in Spending                        
  Budget authority 0 -3.1 -3.1 -3.2 -3.3 -3.3 -3.4 -3.5 -3.5 -3.6 -12.6 -29.9
  Outlays 0 -0.8 -2.4 -2.9 -3.1 -3.2 -3.2 -3.3 -3.4 -3.4 -9.1 -25.6
                           
    Eliminate Certain Department of Education Grants
Change in Spending                        
  Budget authority 0 -1.4 -1.4 -1.4 -1.5 -1.5 -1.5 -1.6 -1.6 -1.6 -5.7 -13.5
  Outlays 0 * -0.8 -1.3 -1.4 -1.5 -1.5 -1.5 -1.5 -1.6 -3.5 -11.1
                           
    Decrease Funding for Certain Department of Justice Grants
Change in Spending                        
  Budget authority 0 -0.5 -0.5 -0.5 -0.5 -0.6 -0.6 -0.6 -0.6 -0.6 -2.1 -5.0
  Outlays 0 -0.1 -0.3 -0.4 -0.5 -0.5 -0.5 -0.6 -0.6 -0.6 -1.2 -4.0
                           
    Total
Change in Spending                        
  Budget authority 0 -5.4 -6.5 -7.9 -8.1 -8.2 -8.4 -8.6 -8.8 -8.9 -27.9 -70.8
  Outlays 0 -1.0 -3.7 -5.2 -6.2 -7.1 -7.6 -8.0 -8.2 -8.4 -16.0 -55.3

Notes: This option would take effect in October 2014.

* = between -$50 million and zero.

The federal government provided $545 billion in grants to state and local governments in 2012. Those grants redistribute resources among communities around the country, finance local projects that may have national benefits, encourage policy experimentation by state and local governments, and promote national priorities. Although federal grants to state and local governments fund a wide variety of programs, spending is concentrated in the areas of health care, income security, education, and transportation. The conditions that accompany those federal funds vary substantially—some grant programs give state and local governments broad flexibility in spending federal funds, whereas others impose more stringent conditions.

This option would reduce or eliminate funding for a group of grants. Specifically, it would:

  • Eliminate new funding for the Department of Energy’s grants for energy conservation and weatherization, saving $2 billion between 2015 and 2023;
  • Phase out grants from the Environmental Protection Agency for wastewater and drinking water infrastructure over three years, reducing outlays by $13 billion between 2015 and 2023;
  • Eliminate new funding for the Community Development Block Grant program, saving $26 billion from 2015 to 2023;
  • Eliminate Department of Education grants that fund nonacademic programs that address the physical, emotional, and social well-being of students, reducing federal outlays by $11 billion between 2015 and 2023; and
  • Decrease funding for certain Department of Justice (DOJ) grants to nonprofit community organizations and state and local law enforcement agencies by 25 percent relative to the Congressional Budget Office’s baseline, reducing spending by $4 billion from 2015 through 2023. (Those DOJ grants fund various activities, including the purchase of equipment for law enforcement officers, the improvement of forensic activities, substance abuse treatment for prisoners, Boys and Girls Clubs, and research and data collection for justice programs and the judiciary.)

If all of those reductions were put in place, federal spending would be reduced by $55 billion from 2015 through 2023. (More details on the individual grant programs appear in similar options presented in CBO’s March 2011 version of this report.)

The main argument for this option is that the concerns those grant programs address are primarily local, so requiring local governments to pay for the programs, if they viewed them as worthwhile, would lead to a more efficient allocation of resources. According to that reasoning, if local governments had to bear the full costs of those activities, they might be more careful in weighing those costs against potential benefits when making spending decisions. In addition, the federal funding may not always provide a net increase in spending for those activities because state and local governments may reduce their own funding of such programs in response to the availability of federal funds.

One argument against this option is that those grant programs support policies that the federal government considers a priority but which state and local governments lack the incentive or funding to implement as much as would be desirable from a national perspective. In fact, many state and local governments face fiscal constraints that might make it difficult for them to compensate for the loss of federal funds. In addition, reducing funding for grants that redistribute resources across jurisdictions could lead to more persistent inequities among communities or individuals. Smaller federal grants could also limit the federal government’s ability to encourage experimentation and innovation at the state and local level and to learn from the different approaches taken to address a given policy issue.