What Will Become of Federal Government Grants?

I have never seen a government’s grants year ahead look so bleak.

Here are three reasons why:

1. Block Grants: The Republican Party (GOP) is big on making “block grants” to the states. The term “block grant” refers to a grant program that provides federal assistance for broadly defined functions, such as community development or social services. Block grants allow the recipient more discretion than other grants in determining how to use the funds to meet a broader program goal. The GOP thinks this gives the states more autonomy to choose how spending should occur. But using block grants at this level of complexity is uncharted territory. Kaiser Health News provides a full discussion on block grants and Medicaid. What is almost certain is block grant allocation will be far less than—for example, the original funding for expansion of the Medicaid program under the Affordable Care Act or whatever program has been cancelled and replaced with a block grant—probably 30 percent to 40 percent less. This means that there won’t be enough revenue to maintain services, the states will likely restrict their availability in order to stay within the allocation and the most vulnerable people will be left out of the decision process.

2. Cabinet Picks: Trump’s cabinet choices haven’t all been approved yet, so we’re waiting on that. But the picks themselves, relative to the departments in questions, are all counter-intuitive—meaning that the candidates are actually hostile to the mission of the various departments! Further, cabinet secretaries, theoretically, are supposed to have a say in the tactical design of government spending. However, because Trump is an authoritarian personality, the secretaries are unlikely to have the discretionary powers usually vested in them. Delegation will surely be limited.

3. Big Government: Government contracts and grants are perceived as part of “big government” and, therefore, are likely to be diminished as much as the administration is allowed to get away with.

The fact is we need to learn more, but from what we see now, the forecast for federal government grant funding is bleak.

One interesting contrary viewpoint comes from Slate, which says this about government spending:

“Trump wants to be loved, and he will do in office what he did in the private sector: exploit revenue and dump costs on others. So Republicans will not get the entitlement cuts they wanted, and Democrats will get plenty of spending. Trump will screw the future. The deficit and debt will explode.”

I think Trump will end up following the GOP leaders, but Slate offers a legitimate perspective.

Some Possible Hope

State funding, however, will likely try to keep up with the need, so that statewide economies won’t spiral out of control, but those grants will be dependent largely on state taxes, and there are limits to that. In New York, Governor Andrew M. Cuomo seems fairly committed to making good on the promises of Medicaid reform, but he will need the Senate and Assembly to go along—especially if he needs to raise taxes to accomplish it—which is not a sure bet.

A feasible option for nonprofits is to get more familiar with small- and medium-sized private foundation grants. Putting together a package of them to fund a project is a viable strategy. On the flip side for clients, these foundations don’t usually require as much in the way of data collection or reporting results as public agencies, but most of them stop funding after a three-year cycle.

So the forecast is very bad.

We’re in a mess. If Trump is re-elected, it will take at least two decades to recover from his administration, if not longer. But here is some good news: If he can be held to one term (or less), it won’t be that hard to undo most of his damage. One of our top health care consultants guesses that undoing his actions will require one year for each year he’s in office during his first term. I concur.

I encourage you and your board to be bolder in speaking up about the crisis Trump and the GOP are creating and lobby hard against the foreseeable changes. This is an important time to be very active in your local Chamber of Commerce and the various coalitions related to nonprofit advocacy.