Redistributive policy and devolution: Is state administration a road block (grant) to equitable access to federal funds?

Over the last several decades, block grants have been a key instrument by which policy authority is devolved from federal to state governments. Whether the block grant approach produces more effective redistributive policy management (on equity or efficiency grounds) is an open and central question. We focus on the equity dimension by positing an explanatory framework that links access to federal block grant funding to the transaction costs associated with intergovernmental grant contracting. We argue that grant access is a function of both state-level institutional choices and the administrative capacity of local governments-which combine to influence the salient transaction costs associated with grant contracting. We apply our theoretic framework to the non-entitlement portion of the Community Development Block Grant (CDBG) program and analyze granting data across distinct institutional settings. We find that local administrative capacity is a key to access, indicating that some localities most in need are least equipped to capture grants, which raises equity concerns. However, the specific way in which states structure arenas of grant competition can make access more equitable. In short, we show that state-level institutional arrangements critically affect access to federal block grant funds when those funds are allocated through competitive grant contracting to local governments.