;

'

:t:

FOREWORD

~he present study has been prepared by Professor V . O. Key of Johns Hopkins Universi ty, a consultant of the Bureau of Research and Statistics. It is made available in tentative form at this time both because its preliminary findings may be useful to others and in order to secure comments and suggestions which can be used in its revision. The present report will be revised when companion studies now in preparation have also reached a form which wi 11 permi t thei r

ci rcula tien.
Thi s report is one of a series of monographs being prepared

vi sion of Finance and Economic Studies in the course of a comprehensive study and review of the major fiscal and economic relations involved in the grant- in-aid programs established by the Soc~. al Securi These studies , being conducted under the immediate direction of Eleanor L. Dulles , Chief of the Division of Finance and Economic Studies , and Daniel S. Gerig, Jr., Chief of the General Economics Section, bear closely upon proposals for the amendm~nt of the grant- in-aid policies embodied in thlS and related
in the Di

ty Act.

legi sla tion.

In preparin~ this document Professor Key has conferred freothers working on related problems in the Division of Finance and Economic Studies and elsewhere in the Bureau of Research and Statistics. He has utilized knowledge and experience which he brought to this study from earlier undertakings , and he has trated and summarized his conclusions in a manner which should be useful to many who are engaged in the study of intergovernmental

quently wi th

illus-

ft seal relationships.
The relation of variations in State fiscal capacity to the allocation of Federal grants- in-aid has been studied from variou~ Analysi s of the comparative burdens occasioned by the raising of funds to be used in matcMng Federal grants, however, has been a somewhat neglected area. The relatiOiships examined here by Mr. Key will be of particular interest to those concerned wi th the method of alloea ting grants under the social aecuri ty program and the problems of rai sing State funds, especially because of the large amounts of money disbursed to the States on a matching basis under

points of view.

thi s program.
Thi s report should be regarded as tentative and preliminary. It is not an official publication of the Board and has not been submi tted to the Board for formal com: ration. It is hoped , however the preser:t form will encourage interest in the stlldy and the development of effective Federal- State fiscal relationships and will invite comments which will be helpful in bringing the repo nal form.

that i ts ~irculation in

rt into fj

I. S. Falk , Director Bureau of Research and Statistics

ebruary 1942

.. ....

..

....

CONTENTS
Page

Introduction
General Principles of the Grant System
The Differential Effects of Matching Requi rements . . 10
The 1imi ts of the Match! ng Principle
. 35 . 55

The Federal Grant System and Equali zation . .

Policy Al terna ti ves and Considerations
Direct Federal Administration

Unmatched Grants
The Variable Gran
. 63

Appendix

. . 67

III

,,

- --_.._-, -------

' - -~-,~~~~---- -~-

.. . . .. .. . . . .~.. .. .....,--~--- ............-----,. .. .....
..--

..

~--,---,--~----

,--

--- --.._-

,-,--,

---

, -' -

Tables
Page

Table l.

Per capi ta amount

s which would have been required

for full matching of all 1939- 40 allotments of Federal grant s , excluding public assistance grant s , related to per capita income . 0 0 0 0 . 0 0 0 . . . . 0

Table 2.

Per capi ta amount s actually expended from State and local funds in 1939- 110 for matching Federal grant s exclusi ve of public assi stance grant s , related to per capita income . 0 . . . 0 o . 0

Table 3.

Per capita amounts actually expended from State and local funds in 1939-110 for matching Federal grants

including public assistance grants, related to per capi
income. . . . 0 0 . .

0 .'

Table 4.

Selected data for old-age assistance programs.

1939-40 by States, grouped according to per cap!
matching expenditures from State and local

funds. .

Table 5.

Per capita amounts actually expended from State and local funds in 1939-110 for matching Federal grants including public assistance grants anc sponsors contributions on WPA projects
Per capi ta amounts actually expended from State and local funds in 1939-110 for matching Federal grant s,
grant s.

Table 6.

excluding and including public assi stance
Table 7 .

Sta te and local funds expended in 1939-40 for matching Feder~l grants as percentages of Federal grants plus such State and local funds

Appendix table l. Amount of State and local funds expended in ~939-40 in matching Federal grants under specified

programs

Charts
Page

Chart lo

00. of traditional type. , Chart 2 . --Hypothetical illust~tion of general tendency of
relationship between State fiscal resources and State aided State programs under 0 . . type. . . legislation of traditional

Hypothetical iilustration of division of costs of federally aided State programs under legislation 0 . . . 0 0 . . 0 . 0 . .

share of costs of fede~lly

Chart 3o Federal- State division of costs of aided program with recognition of relative State fiscal capacity (title VI. Social Security Act).

Chart 4.

P~lationship between

per

capita income in each

1939- 40 allotment s of Federe:l grants, excluding public 0 . '0 0 . as s:1 stance grants 0 . . .
, Chart
50 -- Rele.

State and percentages of income required to match all

tionship between per capi te, income '-n each

State and percentages of income expended from State and local funds in 1939- 40 to match Federal grants, 0 . . . excluding public assistance g~nts

Chart 6.

Relationship between per capi taincome in

each

State and percentages of income expended from State and local funds in 1939-40 to match Federal grants, 0 . including public assistance g~nt s .

0..

Chart 7 .

Relationship between per capita income and percentages of income expended from State and local funds in 1939- 40 to match Federal grants. including public assistance grants, in States in group I, table 4. Relationship between per capita income and from State and local funds in 1939- 40 to match Federal grants, including public assistance grants, in States in group II.

Chart 8.

percent&.ges of income expended

table 4 . .

Chart 9.

Relationship between per capita income and percentages of income expended from State and local f~ds in 1939- 40 to match Federal grants, in States 0 . . in group III. table 4.

., 0 0 . .

. . 0

..

........

......
VII

.,.

Page
Chart 10.

Relationship between per capita income in each State and percentages of income expended from State and local funds in 1939- 40 to match Federal grants , including public assistance grants and sponsors I contributions on WPA projects.
Relationship between per capita income in each State and percentage increases resulting from inclusion of public assistance grants in per capi ta amounts actually expended from State and local funds in 1939- 40 for matching Federal

Chart ll.

grants.
Relationship between per capita income in each State Chart 12. and per capita expendi tures from State and local funds in 1939- 40 to match Federal grants , excluding public assistance
gran t s.

Introduction
An important characteristic of the system of

Federal grants

is its failure to take into account differences in the financial
capaci ties of the States.
the fiscal resources of

It is a matter of common knowledge that

States do not vary directly among the States

wi th the outlays necessary to provide comparable levels of govern-

mental service.

Yet most Federal aid acts apportion money among the

States on the basis of service need and require that the Federal
grant be matched by State or local funds.

The hidden assumption in

this division of costs between the Federal and the State treasuries
is that all States possess , in relation to their responsibilities,
similar financial capacities.

The nature and consequences of this

undeli berate and implici t assumption have
the expansion of

become apparent only with

the grant system.

It is to the matching requirement and its effects that attention will be directed in this memorandum.
are allocated among the States on the basis

When funds to be matched
of

need for the aided

service ,

the burden of meeting the matching requirements will increase

from State to State as relative fiscal capacity declines.

As long as

Federal grants were fairly insignificant in State finance no ill
effects resulted from this characteristic of

Federal aid legislation.

Wi th cumulative additions to the grant system through Federal legi

latibn providing aid for new functions . the following, among other

consequences ,

may flow:

_d_

..

(1)

A point may be reached in the development of the grant

system at which the States with least resources become unable or

able only wi th

the greatest effort to raise revenues to match addi-

tional Federal grants while the wealthier States may take advantage
of such grants with comparative ease.

(2)

The effect of inability of some States to participate

fully in the federally-aided program is that Congress is at least

partially defeated in its presumed objective of reducing variations
in the level of performance from State to State in the aided function.

(J)

Inability of some States to match Federal funds may induce

Congress to eliminate matching requirements for all States or to make
addi tional Federal funds available to all States on an unmatched

basis.

The amount of Federal collection and return to States and

lQcali ties thus would be increased over the amount of Federal col-

lection and return that would be necessary to maintain a national
minimum under an equalization principle.

(4)

For State and local finance , an important consequence of

the differential effects of the matching requirement is that the

proportion of State and local resources that must be devoted to
federally-aided activi ties increases as fiscal capacity declines.

Presumably the poorer the State, the greater is the di sadvantage of

unaided State activi ties

in competition for appropriations against

federally-aided State departments.

(5)
wi th

Continued failure to recognize State fiscal capacity

continued growth of the grant

system. would finally

make the

grant system, in its traditional form, unavailable to Congress in
the execution of Nation-wide programs.

Under such circumstances the

alternati ves open

to Congress. if it desired to continue the use of

the grant device , would be to make grants on an entirely unmatched
basis or to introduce into law recogni tion of variations in relative

State fiscal capacity.

These propositions are reasonable deductions that follow
from an analysis of the principles of Federal grant legislation.

They have been extensively discussed by students of the grant

system,

yet they have not been demonstrated by a comprehensive analysis of

the operation of the

system.

The principal object of this memorandum

is to determine whethe r the evidence supports these deductions.
General Princi les of the Grant System

As a background for the analysis of the effects of the grant
system it is essential that the general principles followed in most
grant legislation be understood.

The apparent congressional objective

in most of these acts is to assure a ~ational minimum of performance
in each State in the aided function.
To accompli sh this end the

general practice has been to devise some rough measure of the need
for the aided service . and to divide the Federal graht appropriation

among the States in accordance with their

need.

The Federal g~nt

plus an -equal amount of State and local matching funds. would thus

enable each State to make about the same degree of progress in dealing with the problem concerned.

Those States which were willing and

able might , of course, spen~ more from State and local funds than

,.

j,. . - , --

,.. ---

::.

:: ::p

necessa~ to match
national minimum.

the Federal allotment and thereby exceed the

A concrete example will perhaps give more specific meaning

:ii

to these general remarks.

The annual appropriation for grants to

~ i'
I :'

States to promote the vocational rehabilitation of " persons
in indust
r:r or

disabled

~!I j ~.l I

otherwise "

is allocated among the States according

to thei r total

population:

a State that has 5 percent of the total

, ::::1
iji II

::::: :: t
:::::" U

:::::::: 1

The

~i! '
fl

I i r: I'i
vi.... \
~ii

::" that

about the same proportion of the population in each State

abled and UbI0 f - ona suscep e voca

ti

re

dis-

habUit on. ti

If that

assumption is correct, each State can, with the Federal grant and

~I

i' !I &1
1:'

u.d~ I ,: ~1)..t
~'1'rt

v4, ~

-I

\ the State matching

funds, make approximately the same headway each

I year in the
free,

vocational rehabilitation of its disabled.

A State is

if it desires and has the revenues, to spend from its own

funds more than is necessary to match the Federal allotment.

the extent that it does so, it exceeds the national minimum set up
by the apportionment formula of the Fede ral aid act.

Graphically the ideas in the preceding paragraph assume a
form something like that in chart 1.
In the bar chart 100 percent

represents the expenditures required to establish comparatively the
same level of performance in each State as measured by the legal
formula for the apportionment of Federal funds.

I t would

be

expected that those States that appropriated more than necessary
to match the Federal funds . indicated at the left of the

chart.

--,

-,- ----

---- '

_~~__ __-

Chart l. --Hypothetical

illustration of division of costs of federally-aided State programs under legislation of traditional type

100~ national

minimum

50~

State

44 45

46 47

48

Legend:
State expenditures in excess of matching requirement

122

State matching funds

Federal grant

would normally be those States with relatively the most

resources,

if it is assumed that a uniformly intense demand for the service

prevails from State to State.
To chart the general idea underlying the grant system as in
chart 1 conveys. of course, the impression that the me~sures of need in each State to attain the national minimum are much more
exact than they actually are in practice.

Nevertheless ,

in the

formulation of most Federal aid acts there bas been an effort to d~vise some presumptive measure, however crude it may be, of the

comparative ' need of each State for the aided service.

At the

inception of most federally-aided programs it was not essentia! that these measures be accurate since grants were generally designed to stimulate the inauguration of service rather than to insure the
maintenance of a uniformly high level of service quanti
all the States.

tati vely in

It was only necessary to apportion the Federal

funds in an apparently equitable way among the States and this

usually involved the use of a formula based on factors that might
be presumed to be related to the need for or the cost of performing

the aided service.
The assistance grants under the Social Security Act are

somewhat different in form from traditional Federal :-:--. id

practice

but in certa~n important respects they are identical in principle

vi th the older component

s of the grant

system.

The older form of

Henry

See the discussion of the problem of apportionment by Bittermann, J., State and Federal Grants- In-Aid, ch. 20, 1938.

.. -'

--_.~

g~nt is based

on the appropriation of a fixed sum to be apportioned

among the States according to their re- lative need for the service

and gene~lly to be matched , dollar for dollar, by State and local

funds. Thus ,

the cost of the minimum program would be equally

shared by Federal and State governments.

The Social Security Act

instead of providing that fixed sums shall be apportioned among the
States according to some measure of the relative need for each of
the categories of public assistance , authorizes grants to equal the
expendi tures from State and local funds to meet public assistance

costs falling wi thin the limits of the Federal act.

The Social

Securi ty Act defines categories of assistance and authorizes

led

indefinite grants equal to State and local outlays wi thin those

categories; the older type of Federal aid act defines the function
to be aided and authori zes grants of specific amount s to be spent

wi thin the definition provided that the grant or that part of the

grant accepted is matched by State funds.

Thus the principle of

the Social Security Act, insofar as the division of the costs of

aided services between the national government. and the

States is

concerned ,
Wi th

is in accord with the Federal aid tradition.

a few minor exceptions Federal aid laws do not take into
In the

consideration the varying fiscal capacities of the States.

allocation of Federal funds allowance is made only for variations
in the need for ai~ed services.
The expectat'ion of- the effect

the grant system , insofar as Federal grant s are required to be

matched ,

would be that the State share of the cost would bear most

heavily on the States with least reso~rces.

Presumably the pro-

portion of State resources required to match Federal grants would
increase as resources declined.

Thi s hypothetical general

tendency

would appear graphically as in chart 2.

Why could it be presumed that the cost of maintaining a

uniform level of service from State to State would bear more heavily
as State resources decline, as indicated in chart 21
The presumption'

made here is that the cost of a given level of service, in relation
to population, tends to be more or less uniform from State to State.

If that is true, it would require a larger proportion of State

resources to pay the State I s share of the

minimum program as State

resources (in relation to population) declined.

It is undoubtedly

true that the outlay necessary to maintain a national minimum in a

particula. r
to State.

service does not vary directly with population from State

Apart from possible regional differences in price levels

and standards of living, the need for the service varies.

A hundred

th~usand people in Oregon would need much more forest- fire protection than the same number of people in Kansas.
It is undoubt edly

true ,

however, that the cost of maintaining a comparatively uniform

level of performance in the entire system of federally-aided

activities bears a more nearly uniform ratio to population from
State to State than does the cost of

anyone of the

individual. com-

ponents of the Federal aid

system. That

matter will be explored

further; for tllli moment

it is sufficient to assume that needg!

for

rr=---

By need in this meant not a subjective desire for public services , but the cost of maintaining an objectively determined standard of service in coverage and quality.

passa~ is

y%

prowould

endency

Chart

--Hypothetical illustration of general tendency of relationship between State fi seal resources and State share of costs of federally-aided

,a

State programs under legi slat ion of t radi tional type

heavily
esumption

elation
) State.

State resources 100%

State
'tedly
in a

m State

Percentage

levels
~undred

x % match
Rank of

requi red to
8

z % grant
44 45 46 47
48

Federal

)tec!dly
liform

State in resources

com-

for

deter-

services varies much less among the States (in relationship to

popu~ation) than does relative capacity to finance those services.
In the Federal aid system there has been , it must be noted

some recognition of the varying fiscal capacities of the

States.

a few Federal aid programs of small fiscal consequence that factor

governs, in part ,

the division of cost of the minimUm program between

the National Government and the States.

The general effect of the

introduction of fi scal capacity

into the computations is that the

proportion of the total cost of the minimum program to be borne by

the State declines as relative fi scal

capacity declines.

The result

may be illustrated by the 1940 apportionment of public health funds
under ti tIe VI of the Social Security Act.

The division of costs of

the . title VI program between National and State governments in a few
high-income and a few low.income States is shown in c~~rt 3.

The

degree of Federal participation , it may be seen from the chart, in
general i~creases as State resources decline.

The Differential Effects of Matching Requirements

The preceding discussion has been in the nature of an exposition of the general principles of the Federal aid system and a statement of hypotheses about some of the ~robable effects of the

application of those

principles.

The verification of these

~o-

theses presents certain technical difficulties that are almost

J./

receive all Federal funds apportioned for 1940 the States indicated had to finance

e figures for the chart are as follows: to

the indicated percentages of the aided program: New York , 49. 7'; California , 48. 9; New Jersey, 46. 0; Connecticut , 45. 4; South Carolina , 33. 5; Alabama , 28. 2; Arkansas, 27. 4; Mississippi , 25.

,.

insurmountable ,

but a usable method has been devised for testing the

ea.

interest in this analysis; that is , the sup-

position that under the prevailing principles of legislation the
weight of matching Federal grants bears more heavily as State

~or

resources decline.
One measure of the effect of the matching requirements might

9tween
ihe

be obtained by determining the percentage of State and local
in each State , necessary to match Federal grants.

revenues,

If the hypothesis

of variation in burden is correct, the percentage would increase as

suIt
nds

relati ve State fiscal capacity
capaci ty .

declined if the further assumption

were made that State and local revenue accurately reflect fiscal

a of
few

A ranking of the States by the percentage of State and

local revenue used to match Federal grants would probably not furnish

a test of the hypothesis since it is probably incorrect to suppose
that State and local tax yields represent a uniform tax effort from
State to State.

The problem would remain of putting the States in

order according to their relative revenue-raising or fiscal capacity.

,si-

At any rate, suitable data on both State and local revenues '!.!
not available for 1940, the year selected for analysis.

are

The problem is to obtain some measure of the relative fiscal
capaci ties of the States.

For the purposes of this analysis the

ral
~ro-

State revenues alone could not be used as a base for computation for several reasons , one being that some Federal grant s may be matched by a cOmbination of State and local funds and the practice in this respect is not uniform from State to State. Moreover State by State comparisons of State revenues alone present difficulties because the division of revenues and functions between State and local governments varies from State to State.

~---~--' :--.

~---~----------'. ~

- ,,-,

~~

, ------ -- -'

-""'-'

, I i :

Chart 3.

prog~ with

division of costs of aided recogni tion of relative State fiscal capaci tl (title VI, Social Security Act)

Federal- State

Percent
100
100% of costs
of ti tIe VI

program

Federal funds

State and local funds

r-I

to;) ~

Ioi!I 0

Ioi!I 0

. 0

en ~

::E

_~.,"~,' ,-,," "' '

~~~

!!:~,-- ""'."-- -.q, -",

~"_

" ........--,..,-- ....., --.., ,

caP2!!2_

!De , ~~ theJ.

~s

~938-:, ~9..!."

~h~,

~.l.,. P,~1!!!!..

of Commerce estimates, has been employed as ' a measure of relative ..~.."w"..,,_

fi scal capac i ty .
capacity.

This measure is

not. precise gauge of relative

A State with an average per capita income of $600, it

will doubtless be conceded , has greater fiscal capaci ty than a State
wi th

an average per capi ta income

of $300.

But no one would claim

that small differentials in per capi ta income would exactly parallel

variations in fiscal capacity.

Apart from evaluations of the fine-

costs
tIe VI

ness of the estimates of per capita income, there are undoubtedly instances in which some income in one State is in a form not readily taxable while in another type of State it may be chiefly of a kind

Ll funds

that can be reached readily through taxation.

Nevertheless it is

probable that relative State fiscal capacity is closely enough

and
1 funds

related to per capita income to make the income figures usable for
the present analysis.

If the hypothesis is correct , the percentage of per capita
income (or the percentage of total income wi thin the State) necessary

to match Federal grants would rise, from State to State , as average

per capi ta

income declined.

The data presented in table 1 and in

scatte~diagram form in chart 4 furnish a test of the hypothesis as
applied to a part of the grant

system.

The per capita matching

requirements shown in table 1 are based on the amounts which each
State would have had to furnish from State and local funds to
receive all grants offered to it on a " 50-50" basis for the Federal

fiscal year 1940 with the exception of the grants for the three

~; ~ -

j ;,; ,

--

'~

,- ,

I i

categories ,of

public assistance.

The figures are not precisely

1r
r :.

the same as the amounts actually used by States and local governments
for matching, since some States failed to match the entire sums
allotted to them on a matching basis.

Hence , the data constitute a
than
onn

ji';
Ii' i if i
1! \:

better measure of the principle of Federal aid leg! alation
would figures on actual expenditures.

;1 !

~1i
asS

ela

IJ fit

Examination of the scatter- diagram, chart 4 . reveals that

jMari
';1
i;WYOT!

it
, i I.f

the percentage which the per capita matching quota is of per capita

'Ohio

income in general tends to decline as per capita income

rises.

;Wast

ffl:1
111, I
il i

J;Hct
:;::penr

view of the weight given population in the apportionment formulae

that tendency is not astoni shing. Certain States ,
diagram ,

identified on the

'JOree ,;Mont :New

however , diverge markedly from the central tendency.

"Colc
Wisc

i; ~i : :

, 111;.

!If::,
ii

will be noted that the States which are out of line with the general
trend are scattered over the entire income range.
two common featur~s:

,Jnd:
)1itlI
Ve Tn

\\1\ il
~ ' - i;.Ii

They have , however

iMaiJ Misf
:EAri: ;'UtaJ 1;1 daJ

: I ill!
~ f ~!; '
'I

they are among the smallest States in terms of

total population and they are , with one exception , among the most

; Fle:

fl,: i

"I

11

:JI

;lowl
The public assistance grants are excluded because there is no apportionment of such grants in the same fashion as there is of grants governed by legislation of the traditional fonn. Included in the per capita matching requirement figures are the sums necesreceive the allotments for the fiscal year 1940 for the
Neb:

, f:

II '
I I

~Viri :Tex;

lEan
Wes

;f ft
i !

,I

Security , employment services (Wagner- Peyser). and wild-life restoration. The figures from which the per capita computations were made were obtained by deducting from the total apportionment to each State for these purposes the amounts which under current legislation do not have
to be mat

control , public health services (under ti Act), chi ld and mate rnal health . crippled tIe VI , Social children

highways (ll regular " Federal aid and secondary). agricultural experiment stations , agricultural extension work (under the Clarke-McNa~ and Norris- Doxey acts), vocational education , vocational rehabilitation , venereal disease

following purposes:

sa~ to

::Sou

Nor
iLou.

forest~

t~:~
Ken

fNor il, Ten
';CGeo

~i~
'i'A;rk

chad.

~~i!'

~/,

Table 1. -- Per

capita amounts which would have been required for full

matching of all 1939- )+0 allotments of Federal grants, excluding public assistance grants, related to per capi ta income

ament s
evada
e a

Average per

State
ew Jersey ew York

capi ta

1938- 40 1/
$874
797 789 785 774 771 714 678 653 646 615 603

income,

Per capita matching requirements 2/
$5. 117 638 665
727 2. 790
746 631 1. 148 856 865 4. 284 884 328 969

Matching requirements
as percentage of per capita income

'1-"*

onnecticut

ri-'

California assachusetts ode Island

elaware

'f:+

'f"! '7x

Illinois
Lta
yoming

arYland

'Ii'1'F

hio
Washington

ichigan ennsylvania

the

Oregon Montana
New Hampshire

Colorado Wisconsin

Indiana

ral
!ver

Minnesota
Vermont Maine

Missouri Arizona
Utah Idaho

Florida
Iowa

Nebraska

Virginia
Texas Kansas

~s-

ry) ,

West Virginia South Dakota North Dakota

Louisiana
Oklahoma
New Mexico

, North Carolina
Tennes see

Kentucky

Georgia
South Carolina

602 601 583 553 544 541 524 509 508 502 493 483 476 469 466 451 449 449 420 420 407 404 386 365 354 349 343 325 309 307 305 300
269 249 245 198

782.
646 892 607 1. 869

1. 232 1. 132 483
159 637 1. 242 019 457
2. 435

1. 176 515 197 1. 172 462 038 053 2. 865 3. 278 071 438 629 1. 118 147
' 1. 186

. 78

Alabama

Arkansas
Miss iss ippi

326 1. 256 1. 249 448 1. 349

it'

From annual figures of Department of Commerce.

Amounts required for full matching derived from data showing allotments of In some of the subFederal grants requiring matching for the year 1939- 40. sequent tables, matching expenditures exceed these allotments because of unexpended ~alances from prior years.

~-'-- , -'---~

~"~~~'

sparsely populated States.
capi ta matching quotas

These two factors as would be expected

from the formulae of the legislation, operate to increase the per
of these States.

Under several acts each

State ,

as a part of its apportionment , receives an equal or minimum

sum regardless of population.

This practice inflates the per capita

figures in the States of small total population; it has been defended
on the ground that unit costs are higher in States of small popula-

tion.

In the highway grants, area and road mileage are important

considerations in the allocation. The effect is to increase the per
capi ta grants in the sparsely populated
States. II

In general , how-

ever, the scatter-diagram, chari 4 , would seem to confirm, insofar

as the grants covered by it are concerned , the hypothesis that the

burden of matching tends to decline as State resources

increase.

The ranks of the deviating States in densi ty of population and total population are as follows: Bank: in Bank in

State
Delaware
North Dakota South Dakota

densi ty

total

Idaho
New Mexico

Montana
Wyoming

1/ Most of the States deviating markedly from the cent ral tendency
also contain large blocks of public lands and in such States a variable matching requirement for highway grants prevails. States with over 5 percent of their areas in unappropriated public lands the United States bears 50 percent of the cost of Federalaid highway projects plus " a percentage of such estimated cost equal to one- half of the percentage which the area of the unap. propriated public lands in such State bears to the total area of This factor has been taken into account in the comsuch State. putations of matching requirements, but it does not pull down the matching requirements in these States to the central tendency for all States.

Nevada

---

--,---------~.._,--.._---,-----, ------ ----

Helationship between per capita income in each State and percentages of income required to match all 1939- 40 allotments of Federal grants , excluding public assistance grants !/

requi rement 8

as'Dercen

f i com

Dak.

). Dak.
Mon
\It..",

. N

Dt! 1.

200 300 400 500 600

700

800

Per capita income data upon which this chart is based , see table

! ,,

The range of variation in the weight of the matching quotas
shown in table 1 is impressive. - If the highest six States in per
capi ta income (with the exception of the atypical States of Nevada

and Delaware) are compared with the six

lowest States in per capi

income , the average weight of the matching requirements (in terms
of proportion of per capita income) of the high income States is

about one- fifth that of the low-income group.

If the amounts actually used to match grants

(a~in excepting

the public assistance grants) are used , the result in fact is almost
exactly the same as for the apportionments.

The data are presented

in table 2 and chart

5. The general pattern is almost precisely the same as that ~f table 1 and chart 4. 2/ In table 2 , and all other
percent of per capita income in New Jersey, New York , Connecticut , California , Massachu, and Rhode Island. The average for Tennessee, Georgia . South Carolina , Alabama , Arkansas, and Mississippi was . 51 percent. The figures in table 2 are not exactly comparable with those in table 1. In the totals on which the per capita matching expenditures in table 2 are based is included one item excluded from table 1 , that is, expenditures to match grants for the maintenance of soldiers ' homes. but this is a small item. Other sources of variations in the figures in the two tables include the following: (1) In some instances States did not match the total sums avail(2) In other instances States matched more than the 1940 apportionment , since, under some of the Federal aid actB it is POBst ble to match in 1 year unexpended balances from apportionment s of prior years. The most important feature of the figures in table 2 however , relates to the highway grants. Accounting for public works projects does not readily lend itself to fiscal breaks at a gi ven moment. A project may be contracted for in one year and Different States spend thei r Federal allotments at different rates and funds are available for some time after the end of the year for which the apportionment is made. Hence, to obtain figures comparable between States it was necessary to use the highway apportionment Sui table expenditure figures are not available. It should also be noted that the special dispensationwai ving the highway matching requirement for the benefit of Arkansas was not in effect during the fiscal year 1940.

The matching quotas , on the average, were . 10

setts

able;

paid for in an~ther.

/ \ ~ \ll

~y 6/)

:)(0

figures.

, ~- --

' _' --_H

'rable 2.

Per capita amounts actually expended from State and local funds in

1939- 40 for matching Federal grants , exclusive of public assistance grants
~as
related to per capita income

Average per

State
.da

capi ta income 1938- 40 1/

Per capi ta matching
expendi ture s

Expendi tures as

percentage of per
capi ta

income

ita

Nevada

NewJer sey
New York

Cohnecticut
Delaware

California

$874 797 789 785 774
771 714 678 653 646 615 603 602 601 583 553 544 541 524 509 508 502 493

$4. 378

Massachusetts
Rhode Island

Maryland

ling
lost

Illinois

Wyoming

Ohio

Washington Michigan

Pennsylvania

the

Oregon Montana
New Hampshire

Colorado Wisconsin

!pi ta :hu~outh

Indiana
Minnesota
Vermont Maine

Missouri Arizona
11-

Utah Idaho

Florida
nce
ng:
Iowa

Virginia
Texas Kansas
We st

Nebraska

poss of
! 2

South Da.k:ota
North Dakota

Virginia

Louisiana
OklahOJll8. New Mexico

483 476 469 466 451 449 449 420 420 407 404 386 365 354 349 343
325 309 307 305 300 269 249 245 198

647 656 752 695 796 640 129 849 878 188 884 358 974 774 692 888 557 897 262 154 493 144 635 252 018 479 470 182 507 156

1./-5

'15
If Lt

lf3
~15
'to

~'l

Kentucky
North Carolina

Tennessee Georgia

030 054 812 268 071 448 632 109 153 203

92,
. 2

ary
ne-

South Carolina

1.337
209 249 457 337

. 5

AlabaJl!a

cial

Arkansas

Mississippi

From annual figures of Department of Commerce.

See appendix for

dB. ta

of individual programs and sources used.

:: '-

.~

,",

~=-

-,

.\

;j,

Chart 5.

Relationship between per capita income in each State and percentage of income expended from State and local funds in 1939- 40 to match Federal grants , excluding public
assistance grants

Matching expenditures as ~ercent of income

Dak.

.i

Dak.
. Mo

. Wyo.

~i I

1 I'

;i

200
For

300

400

500

700

800

data upon which this chart is based , see table 2.

t-=;

tables in this memo~ndum, the amounts spent by States, if

any, in
Such

excess of sums used to match

Fede~l funds

are not included.

data are not available for all the federally-aided functions; and if
they were, their use would introduce factors irrelevant to the questions under examination.

The gene~l conclusion regarding the effects of the matching
requirements seems to be fairly well established insofar as the

g~nt system
g~nts ,

as a whole, with the exclusion of the public assistance

is concerned.

It would hardly be expected that the addition

of expenditures to match the public assistance

g~nts would produce
The

for the entire system a pattern like that in charts 4 and

formulae on which charts 4 and 5 are based presumably produce com-

pa~bility from State to State in the level of service since the

g~nts plus matching

outlays are designed to furnish within each
Moreover, most of the

State a roughly uniform level of service.

Federal money available under the older g~nts, which predominate in
aharts 4 and 5, is matched.

No data satisfactorily measuring the

comparati ve adequacy of levels of service from State to State are

available for the public assistance

prog~s.

The States vary in

the amounts which they pay in assistance to each recipient, in the

proportion of eligible persons

g~nted assistance, and

in the pro-

portion of the total population that is eligible for assistance under
the terms of the Social Security Act.
1 t

would be useful for analysi

to employ estimates of what it would cost in each State to maintain

assistance prog~ms of a compara?le

character.

Presumably the weight,

----..

-----~---

- '-- --' ,

-,-

---- - -- -

--

from State to State, of financing all the

Fede~l aid activities

included in chart 5 plus a uniform level of public assistance would

vary among the States inversely with per capita income as in charts 4

and 5.

No satisfacto~ estimates of the cost of such assistance

programs are available, and the analysi

smust be designed

to ascer-

tain the pattern, if any, of actual expenditures.

In table 3 and chart 6 the relationship between per capita

matching expenditures on Federal aid programs, including the

g~nts
!!1J

for public assistance, and average per capita income are shown.

While there is some tendency for the ratio of matching expenditures to income to rise as per capita income declines, the scatter diagram
does not indicate a close correlation. the scatter ~~~~~--_ d?_ D:?!_-!,:c:,c()r~_

The relationships shown in

neatly wit~ ,. ()~r hypothesh chiefly State to becaus~_ tl1!_. ~~vels - of public assistance programs ~:!_
E:~~_.

State.

This fact suggests the possibility of furthering the analysis

by a classification of the States into groups with approximately the
same levels of public assistance performance.

The question immediately arises , what criteria shall be used
in classifying the States into groups wi th similar assistance levels?

As a beginning, the States were grouped into three classes according
to per capita expenditures for old-age assistance.
It is at once

-- The figures in table 3 are based on those of table 2 plus State expenditures to match the public assistance grants. The calendar 1940 figures for aid to dependent children are used instead of for fiscal 1940, however. Table 3 includes then the data of table 2 plus expenditures to match grants for old-age assistance, aid to blind, aid to dependent children, and administration of aid to

dependent children.

Table 3.
1939-

40 for matching Federal grants.

related to -ner
State
Nevada
New Jersey New York

Per capita amounts actually expended from State and local funds in including public assistance grantee

can ta ncome Average per
capi ta income,

1938-40 !./
$874 797 789 785 774
771 714 678 653 646 615 603 602 601 583 541 524 509 508 502 493

Per capi ta matching
expendi ture s

Expenditures as
percentage of per capita income

$7. 652

Connecticut
Delaware

California

Massachusetts
Rhode Island

Maryland

Illinois

Wyoming

Ohio

Washington Michigan

Pennsylvania
Oregon Montana
New Hampshire

Colorado Wisconsin

671 012 155 646 486 026 216 873

040 338 318 724 447 452 628 751 958 739

Indiana

Minnasota

Mis80uri Arizona

Vermont Maine

Florida
Iowa

Utah Idaho

Nebraska

Virginia
Texas Kansas
West Virginia South Dakota North Dakota

Louisiana
Oklahoma
New Mexico

469 466 451 449 449 420 420 407 404 386 365 3~4
3 9

068 912 154 950 673 885 672 849 155 021 716 641 ~04
2. 14

~01
5. 41

Kentucky

North Carol ins
Tenne saee

Georgia
South Carolina

Alabama

Arkansas
Mi ssi

ssippi

343 325 309 307 305 300 269 249 245

955 419 891

1.58

1.941
075 598 1. 924 885 818 998 1. 772

198

11 . From annual figures of Department of Commerce.
gf

See ' appendix for data of individual programs and sources use~.

..

.'

Coo rt

Relationship between per capita income in each State and percentages of income expended from State and local funds , including public in 1939- 40 to match Federal grants

assistance grants !/

Percent of income

Colo.

1.6

1.4

1.2

1.0
NI!

200

300

400

500

600

700

800

Per capita income

For data upon which this chart is ba. sed, see table 3.

apparent ,

of course, that within each of these three groups per
all grant programs) will bear more

capi ta matching expenditures (on

heavily as per capita income declines.

However , does this method of

classifying the States also have the effect of grouping

then! into
This

categories with assistance programs of similar characteristics?

statistical maneuver groups the States as in table 4 where certain

characteristics of the old-age assistance program is shown for the
States in each of the three categories.

The States wi thin

each of

these groups do not have exactly the same sort of assi stance programs
or the same assistance needs ,

but the differences wi thin

each group

are much less than the differences among all the States.

By averag-

ing the various columns for each of the three groups the following
summa
is obtained:

Average

Average

States

recipients per 000 age 65

percent of
total population 65 and

Average of average
payment per

applications
pendi ng . pe 100
r

Average

and ove r

recipient
$11.
19.

over
Group I
231. 7

reci

ient s

27.
12.

Group II
Group I I I

233. 360.

23.

Probably the most important difference between the three groups of
States is in the amount of monthly assi stance payment per recipient

but between groups II and III there is a marked difference in the

The emphasis in this comparison lies on the State as a unit , hence the figures computed are averages of the figures for the States and the States have not been merged as if each group constituted

an area.

----

..----------

/.

(,:.

proportion of those over 65 receiving assistance.

Observe, also,

the interesting gradation in the number of applications pending for
each of the three groups.

If there 18 any basis for supposing that

administrative policy is roughly similar with reference to the stimulation and acceptance of applications when funds "re inadequate

Cj~-":

the conclusion would be that the State

s in group I had the largest

unmet need, those in group III the least.

Whatever the conclusion with reference ~o the validity of
for the grouping of the States, the data

each of the three groups

are presented in scatter- diagram form in charts 7, 8, and 9.

With

the data for chart 6 thus subdivided the familiar pattern of charts 4

and 5 reappears; that is, the percentage that the matching expenditure

is of average per capita income increases sharply with a decline in

income.

!5I In the examination and study of these charts let it be
(1) the factors that accounted for deviations from the

remembered:

central tendencies in charts 4 and 5 project through into these

charts; (2)

among the States shown on each of the charts there remains

considerable variation in assistance

levels.
6, 7, 8,

It may be thought that the turn of affairs in charts
and 9 invalidates the hypothesis.

The hypothesis is not invalidated

but it must be modified somewhat to take into consiaeration all the

fact s .

It was stated at the outset that through cumulative additions

to the grant system the point might be reached at which the States

ill The fact that a State wi th

a low per capita income devotes a relati vely large percentage of that income to matching grant s does not performance in the aided programs. of assure a high or adequate ~l

Table 4. -- Selected

data for old-age assistance progra!IIS. 1939- )~0, by States, grouped according to per capita matching expenditures from State and local funds

States ranked

by 1938- 40
capi ta

wi thin groups

per

Per capita matching expenditure

Recipients per

000 estimated
population 65

Persons 65 and over as percent

Average
payment per

income

years and over. June 19~0 2/

of total po-oulation

recipient.

Applications pending per
100 recipients.

June 1940

!i/

June 1940 5./

Group I:
New Jersey

States spending less than $1. 10 per capita for matching old-age assistance grants. 1939-

Delaware
Rhode Island

Maryland

875 658 086 034

Virginia /lest Virginia Louisiana
Kentucky
North Carolina

,349
622 832
585 795 ~87
. 83

708 937

New Mexico

Tennessee Georgia
Alabama

South Carolina

Mississip-oi

Arkansas

363 341 421

125 128 150 174 115 234 452 310 263 253 299 217 320 181
247 239
to $2.

20. 11. 35 19. 17.

6. i

18.

4,3

13. 11. 14.
10. 10.

18.
21. 20. 19. 197. 14. 17. 44. 33.

Group II:
New York

States spending from $1. 10
162 1. 551 080 853 445
139 288

10 per capita for matching old-age assistance grants, 1939- 110
25. 26. 20. 23. 16. 22. 21. 22. 18. 15. 21.
12. 01

Con necticut

linois

oming

chigan nnsylvania
New

Hampshire

sconsin diana
rmont
Neb raska

orida

ine

xas Kan sas
rth Dakota

047 017 451 937 338 037 167 599
1. 410

150 147 276 341 251 158 109 234 229 140 161 371 284 415 225 245

43.
19.

17. 43. 23.

16. 10. 19. 16.

Table 4 (Continued)

Group III:

States spending over $2. 10 per capita for matching old-age assiste~ce grants, 1939-

Nevada
Ohio
We.

California
shington

Massachusetts
Oregon Montana Colorado

Minnesota
Miss ouri

274 944 148 407 959 370 342 892 882
243

Arizona

Utah Idaho Iowa
South Dakota

Oklahoma

514 134 128 569 440 162

379 308 261 254 313 228 393 508 323 295 479 505 308 252 351 611

26. 37. 28. 23. 22. 21. 18.
3-3. 75

15.
22.

21. 16. 27. 21. 21. 20. 19. 70 17. 71

23.

1/ Amounts expended by States and localities for matching Federal grants assumed to equal Federal expenditures for assistance to recipients as reported in Social Securit Bulletin, February 1941, p. 58. 2/ Social Securit Bulletin, August 1940, p. 48. ortion of 1/ Release of U. S. Bureau of the Census based on 5 percent cross-section entitled Number and Pro Preliminary) : 1 40. (series P-5, No. 7), April 23, 19 Persons 6 Years Old and Over Fifth Annual Re ort of the Social Securit Board, 1940, p. 197.
21

Ibid. , p:J:9li.

. .

Chart 7.

Relationship between per capita income and percentages of income expended from State ana local funds in 1939to match Federal grants. including public assistance grants , in States in group I, table

4!/

Matching expendi tures
as percent of income

1.4

1.2

- N. UQ'

Del.

It N.

200

300

400

500

600

700

800

Per capita income

!/ For data upon which this chart is based , see table 3.

,_-.,

- -- - ---

---,..,------ --- -

Chart 8.

Relationship between per ~apita income and percentages of income expended from State and local funds in 1939to match Federal grant s, including public assistance grants , in States in group II, table 4 !/

Matching expendi tures
as percent of income

IB.k.

1.4

Wyo.

. 8

200

300

400
Pe r capi

500 ta income

600

700

gOO

For data upon which this chart is based

see tab Ie 3

--- --_n

Chart 9.

Relationship between per capita income and percentages of income expended from State and local funds in 1939to match Federal grants , including public assistance grants , in States in group III , table 4 !/

Matching expenditures
as percent of ~ncome
1. g

. Colo.

1.6

. Mon

. N~'

. C ~lif

.

200

300

400

500

600

700

800

900

Per capita income

For data upon which this chart is based, see table 3.

--,--- -..
j!,

----..~..~

---,

wi th least resources might be unable to match Federal grants while

the wealthier States could take advantage of grants available.

That

hypothesis must be modified to ine1ude the proviso, " other things

being equal.

In other words

, fi seal

capaci ty alone does not d~ter-

mine whether a S

~k.mJ.J,. mt,t,tch,

--_._~---,~O,"'
available.

hQ~E!~~J:'~nts

Among the

factors other than variations in fiscal capacity that may have con-

. tributed to the formless
the following:

statistical distribution in chart 6 are

(1) The greater desire for old-age assistance in certain

States as manifested in pressure by organizations of the aged has
led to a relatively higher level of old-age assi stance in some States

than in others; the factor of public demand also influences levels
of performance in aid to dependent children.
(2) The traditional or customary atti tudes toward the level

of public expenditures varies greatly from region to region and would be expected to influence the level of State and local appro-

priations for public assistance quite independently of fiscal
capaci ty.

(3) The degree to which some States had taken advantage of

public assistance grants even as late as 1940 may have been
il~luenced by constitutional limitations and traditional governmental i~flexibility.

If some States operate under a higher resist-

ance to action than others , this factor alone , apart from absolute fiscal capacity, would influence the level of the public assistance

program.

_.~ ----,.~----

-, - ---

~-----~, ---_..

_--

---------- !.:?,-, -- ~----- -'-~-,

(4) The comparatively low level of public assistance under

the Social Security Act in a very few States of high fiscal capacity

may have been influenced by a tendency to care for some of the aged

as a part of the family unit under general relief financed solely
from State and local funds.

(5) A basic assumption of the type of analysis in chart 6 is

that the cost of providing a comparable level of service tends to
vary from State to State with population.

The deviation of some of

the low income States may be explained not so much by relative fiscal
capacity as by a tendency to regard a comparatively low level of
public assistance as adequate.

In other words the variations in

"level of service " as measured by the degree of local satisfaction
wi th

prevailing programs, may be less than the variation in dollars

of expendi ture per capita.

(6) A source of noncomparabili ty comes from the fact that

some States in 1940 had no programs of aid to dependent children.

less important variation, in terms of dollars, was the absence in
some States of programs of aid to the blind.

A case study of each State would be necessary to explain its

position on chart 6.
for each State.

The foregoing factors, and perhaps others, in

addition to relative fiscal capacity would enter into the explanation
Yet on the basis of the entire analysis , the general
~y:stE!lD. tend

pro

J)~~~~

lit the pre~iling PI'inciples of the grant

a heavier burden on the poorer States in the maintenance of
a uniform national level of service seems to be comp~E!telY

~~d. ~t,

The form of the scatter in chart 6 is determined by the fact that in
the public assistance programs no national minimum has been achieved.

The establishment of such a minimum would require relatively larger
contributions by the poorer States as was shown in charts 7, 8, and 9
in which the States were classified into groups with more nearly
uniform standards for public assistance.

Although other factors have

been influential in determining whether a State would take advantage
of the grants available for the public assistance programs
, it appears

that relative fiscal capacity has been one of the most important

factors governing assistance

levels.

To make the analysis of the effects of matching requirements
complete it may be desirable to include the Work Projects Administration program.

Although the WPA does not operate through the

traditional grant procedure , the principles for the division of the

costs of WPA non- Federal projects between the Federal and State

governments is similar to that of the grant system in that there is
now no recognition of variation in relative State fiscal capacity.

Un~er the Emergency Relief Appropriation Act of 1939 it was provided that after January 1, 1940, " not to exceed three- fourths of the
total cost of all non- Federal projects thereafter approved" should

be borne by the United States and not less than one- fourth by the
State and its political SUbdivisions.

!2J In table 5 and chart 10

the same sort of analysis as in chart 6 is given but sponsors

contributions on WPA projects are included in addition to the total

ill 53

Stat. 928

..,

..- --,.. "' -- - -

matching expenditures on ordinary grants in table 4.

The pe rcentage

that State and local matching expenditures including sponsors I con-

tributions bears to State income tends generally to increase from State to State with a decrease in per capita income as may be seen
from chart 10.

One might conclude from the chart tr~t the necessity

of meeting these charges was placing a very heavy burden on the

poorer States.

There are important unknown factors , however.

is impossible to estimate the degree to which WPA expenditures have
been substi tuted for outlays formerly made exclusively from State

and local funds; nor is it known whether this varies from State to

State.

The degree to which States and localities have had to develop

new revenue sources to finance sponsors I contributions is not known;

nor is it known whethe~ this varies from State to
The Limits of the Matching Princi

State.

So long as federally-aided acti vi ties

involved comparatively

small sums of money the differential effects of the matching require-

menta on State and local finance were of more theoretical than actual

importance.

The question now is whether the level of total matching

quotas has been raised to the point where serious consequences ensue.

It will be recalled that among the probable consequences of cumula-

ti ve additions to the grant

system pointed out were the following:

(1) Inability of poorer States to match grants offered on the

traditional grant principles to the same degree as the wealthier

States;

(2) Development of unmatched grants because of a hesitancy to

aban,ion the traditional practices which the recognition of - variations
in State fiscal capacities would

involve;

Table 5.

Per capita amounts actually ' expended from State and' lo~a1 funds in 1939- 40 for matching Federal grants I including public assistance grants and sponsors ' contributions on WPA projects

Average per

State
Nevada
New Jersey

capi ta

income,
1.1

Per capi ta ma t ching
expendi tures

Expendi tures as

percentage of ~er

1938- 40
$874 797 789 785 774
771
7111

g.l

capi ta

income

$14.

New York

Connecticut
Delaware

711

Massachusetts
Rhode Island

California
nUlloi s

Maryland
Wyoming

Ohio

Washington Michigan

Pennsylvania
Oregon
Mon tana

New Hampshi re

Colorado Wisconsin

Indiana

Minnesota
V ermon t

678 653 646 615 603 602 601 583 ?53 544 541 524 509 508
1)02

1.27 1.15
11. 10.
lL9

1.82

1~. 84

14.

1.65
c:n
113

493
11g3

Maine
Mi s s ouri

Art zona Utah Idaho

Florida

Iowa Nebre, ska

Virginia

Texas Kansas
West Virginia
Sou th Dako te,

476 469 466 451 449 449 u20 420 407 404

1.56
11. 12.
11. 70

1.68
59 -

)86
365 354 349

1.36 1.89
11. 10.

North Dakota

Loui siena Oklahoma
New Mexico Ken tucky

;43
325 309 307 305

North Carol-ina Tennessee Georgia Sou th Carolina

Alabama
Arkan sas

Mississi"rrpi

300 269 249 245 198

1.57 1.88 1.58
2. J 6

From annual figures of Department of Commerce.
See a:r:mendix for data of individual programs and sources used.

Chart 10.

Relationship between per capita income in eash State and

percentages ' of inco~e expended from State and local funds
in 1939- 40 to match Federal grants , including public assistance grants and sponsor s contributions on WPA
projects

!.I

Matching expendi tures
a~ percent of income

Dak.

Dak
Co 10.

Mon

.NI

1.0

200

300

400

500

600

700

800

900

Pe r capi ta

income

For data upon which this chart is based, see table

(3) Financial disadvantage for unaided services particularly

in the poorer States because of the superior position of aided services in maneuvering for appropriations.

In this section of the memorandum the evidence on these

points will be examined and let it be said at the outset that these

proposi t ions are more

difficult of verification or disproof than the

question examined in the first part of this analysis.
The over-all growth of the matching requirement s may be indi-

cated by the fact that in 1930 approximately $90 million in State

and local revenue was needed to match all Federal grants offered; in
1940, the 48 States expended approximately $429 million to match Fed-

eral grants. If the

sponsors I contributions for WPA projects are con-

!'!!J

sidered to be matching funds the figure rises to around $920 million.

The figures on matching expenditures underestimate the ~Qtal effect ederallY-Qided of Federal aid on State finance, for almos every program is so conditioned that qualification for the grants requires the expenditure of more than the matching requirement. Some

acts permit the expenditure of the Federal grant and matching funds only for certain phases of a governmental function. Highway right of-way. for example , must be financed without benefit of Federal aid which is available for road construction and design only. Similar sorts of conditions prevail in most of the other grant programs. In old-age assistance , for example, the 5 percent addendum may be used for administ ration or for assistance, but more than the 5 percent sum is usually required to maintain adequate administrative services. Another type of grant condition requires the earmarking of State revenues from certain sources for specified purposes. The act of June 18, 1934 , which is the most important legi slation of this type , requires that States use for highway construction, improvement , or maintenance " at least the amounts " provided by law at that time from the proceeds of motor-vehicle registration fees taxes, and other special taxefl on motor-vehicle owners and operators. The penalty for violation is the forfeiture of not more than one- third of the annual Federal grant. The proceeds of these taxes are generally much more than is necessary to match the Federal. grant for highway purposes. The Wildlife Restoration Act (50 Stat. 917) requires as a qualification for the receipt of grants the passage of "laws for the conservation of wildlife which shall include a . prohibi tion against the diversion of license fees paid by hunters for any other purpose than the administration " of the State fish and ~me department.

licenses, ~soline

The effect of matching requirements on State finance differs
greatly under two sets of condi

tion~.

If grants are offered to aid

in the financing of an activity already being carried on in most of

the States, existing expenditures may (in the absence of special conditions in the Federal act) be used to match the Federal' grant.

The

result may be either the substitution of Federal for State funds or
the expansion of the scope of the activity in the States.

I f grant s

are offered , however , to aid in the financing of an activity that is
new and relatively undeveloped , two possible consequences may follow.
The State will have to divert revenue from other acti

vi ties to match
revenue.

the grant or it will have to discover new sources of

Generally the only alternative open to the State is the exploitation of new sources of revenue since existing functions are firmly

entrenched and the very fact of their longer existence is an index
of the priority they hold in the scale of social values.

The bulk of matching revenues has been for new or expanding
governmental functions , and probably most of this revenue has been

new " revenue.

Outlays to match highway and public assistance grants

make up a very large proportion of State and local funds used to
match Federal grants.

The present highway system has been in large

part built since the inauguration of Federal aid for highway construction, and in the same period motor-vehicle and gasoline taxes

developed to finance highway acti vi ties.

Similarly State old-age

assistance programs have been developed chiefly since the passage of
the Social Securi ty Act.

In 1934 , State and local governments spent

$32 177, 000 under old-age assistance acts.

State and local expendi-

tures for this purpose have multiplied over sevenfold since that

time.

In no State was the 1934 level of expenditure so high that

the introduction of Federal grants permitted a substitution of Federal
for State and local fundS.

!2/ The degree, however , to which localiState.
Although it is not essential for

ties had to increase their expenditures to car~ on the security

program varied from State to

this discussion, detailed analysi B would sho w that as the Federal

grant system has evolved the general effect has been to require the
development of new sources of State and local revenue or the more
intensive exploitation of old sources.

It is not to be supposed , of

course, that the Federal grant system was the sole cause of the
development of new State and local revenues.

New State and local

fiscal effort and the development of the grant system have been parallel results of the growth of demands for new and enlarged public

services.
With these background remarks , it is possible to turn to the

consideration of the evidence on the general questions under analysis
in this section of the memorandum.

In the determination of whether
, it

matching requirements bear more heavily as resources decline

became apparent (in the discussion of charts 6, 7, 8, and 9) that
variations in per capita income were not the only factor in deter-

mining whether a State could or would raise revenue to match new

For a description of old-age assistance as of 1934 , see Committee on Economic Security, Social Security in America , ch. viii.

Federal grants , but the contention was expressed that the per capita

income was perhaps the most important factor in the

situation.

It may be supposed that as the total level of all types of

grants requiring matching reaches a cri tical

point the rate of increase

in the appropriation of matching funds might vary with fiscal capacity.
If, through some strange enactment , all States were offered all the

money that they could match to be used as they desired , presumably

the State wi th

the most resources would receive the largest grant with

gradations on down to the State with relatively the least resources.

In the case of grants for specific purposes public atti~udes toward

the aided service and other factors in addition to fiscal capacity
determine whether grants offered will be matched.

Yet if those non-

fiscal factors could be held constant , it might be supposed that

after a certain point in the development of the grant

system, the

rate of increase of State and local matching funds would decline as
relative Sta~e fiscal capacity declines.

How can this supposition be tested and how can it be deter-

mined whether the grant system as a whole has reached the point indi-

cated?

Table 2 shows the per capita matching expenditures for all

the regular Federal ~rants except the grants for public assistance.

Table 3 shows the per capita matching expenditures for all grants
included in table 2 plus the expenditures for matching public assis-

tan ce gran t s .

Wi th the exception of a few grants of small fiscal

importance, the change from table 2 to table 3 is about what happened
historically as the public assistance grants became available.

the hypothesis expressed in the preceding paragraph is

correct, it

would be expected that the percentage increase for each State from
table 2 to table 3 would be greater as average per capita income

increased, the theory being that the States with larger per capi
incomes had relatively greater latitude in the development of new

revenues.

The percentage increases are shown in table 6 the data of

which are presented in scatter- diagram form in chart 11.

The array in chart 11 would seem to lend considerable support
to the theory that the higher per capita income States were much
less near to the margin of income that could be diverted to public

purposes than the low income States and, hence, could increase their
revenues more readily.

In the interpretation of the scatter diagram

certain additional factors must be taken into account.

Some ext reme

deviations from the cent Tal

tendency will be noted.

In some of these

instances the State was already making relatively high per capi

matching expenditures and the percentage increase under the assistance
program was , hence , compara ti vely small.

In other instances the

percentage increase vas high because the increase was computed from
a relatively low per capita matching outlay.
immediately arise ,

The inquiry may
in chart 11

do the States with high inc.reases

consistently have low per capi ta
included in table 2.

matching outlays on the functions

If so, the relationship between per capita

income and the expansibility of the Federal aid system shown in
chart 11 would be a spurious one.

To furnish a check on this question,

the per capita matching expend! ture data from table 2 are plotted

Table 6.

Per capita amounts actually expended from State and local funds in 1939for matching Federal grants, excluding and including public assistance grants Average per

State
Nevada
New Jersey

ca'Pita income,

i938- 40
$874 797
789 785

1/

Excluding Including public assistance

Per cap! ta matchin

rants
129 849 878 188 884 358

endi tures

public assistance

rants

New York

Connecticut
Delaware

Massachusetts
Rhode Island

California

Maryland

Illinois

Wyoming

Ohio

Washington Michigan
Oregon Montana

Pennsylvania
New Hampshire

Colorado Wisconsin

Minnesota
Vermont Maine

Indiana

Missouri
Ari zona Utah Idaho

Florida
Iowa

Nebraska

Virginia

Texas Kansas
West Virginia
Sou th

Dakota

North Dakota

Louisiana
Oklahoma
New Mexico

774 771 714 678 653 646 615 603 602 601 583 553 544 541 524 509 508 502 493 483 476 469 466 451 449 449 420 420 407 404 386 365 354
. 349

$4. 378 647 656 752 695 796 640

$7. 652
2. 040

338
2. 318

74. 215. 256.
208. 2

3. 724 447 452 628 2. 751 958 6. 739 671 012
155
2. 646

38. 584

595. 132. 224.
236. 9

974 774 692 888
557 897 262 154
1. 493

144 1. 635 252 018 479
2. 470

Kentucky
North Carolina

Tennessee Georgia South Carolina
Alabama

343 325 309 307 305 300
269 249 245

Mississippi

Arkansas

198

182 507 156 173 474 030 054 812 268 071 448 632 1. 109 153 203 337 1. 209 1. 249 457 337

4. 486 026 3. 216 8. 873 055 4. 104 068 972 154 950 673 885 672 849 155 021 1. 716 641 304 414 301 441 955 419
891

60. 315-3 269. 223. 241. 165.
80. 106.
367. 7

221. 255. 239. 85. 154. 215. 181. 297. 129. 141.
175. 7

941 075 598 924 885 818 998 1. 772

132. 46-3 79. 112. 129. 88. 66. 175. 274. 47. 75. 80. 116. 43. 55. 45. 37. 32.

From annual figures of Department of Commerce.
See appendix for data of individual programs and sources

used.

Chart

ll.

Relationship between percentage increases assistance grants in from State and local
grants

per capita income in each State and resulting from inclusion of public per capita amounts actually expended funds in 1939- 40 for matching Federal

Percentage increase in matching expenditures by inclusion of public assistance grants

600

. "'1a~8.

Calif.
500

400
Co 10.

300

200.

100

200

300

400

500

600

700

800

900

Per capi ta

income

For data upon which this chart is based , see table

in chart 12.

It is evident from this chart, that, while the variations

in per capita matching expenditures included in table 2 have influenced
somewhat the pattern of chart 11 , they are not of such a character

as fully to explain away the general tendency exhibited in the latter

chart.
When the States in the lower ranges of the income spectrum
cease to meet expanding matching requirements , Congress has two major
alter~ati ves , if it wishes to continue to employ the grant device for

relatively undeveloped functions.

It may inaugurate grants with

matching requirements that decline as State resources decline, or. to
make the objectives of its program attainable , it may offer grants

on an unmatched basis to all

States.

During the past 10 years there
In 1930 the

has been a very rapid increase in unmatched grants.

Federal grants available on an unmatched basis were almost negligible
in amount.

Unmatched payments consisted of small flat sums available

to each State under some acts as a part of a larger program, such as
the flat grant of $10. 000 to each State under the Smith- Hughes Act.

The entire sums for agricultural experiment stations and the agricultural and mechanical colleges were paid on an unmatched basis and

the public- land

States were not required to match completely the

highway grants. During 1940, however, unmatched funds !2/ excluding
grants for unemployment compensation insurance administration, were

Wm
two- thirds

$82 796, 242; with the addition of unemployment insurance administration

That is , grants with no matching requirement and the amounts of other grant s above the St~ te matching requi red , as , in a program
in which the Federal Government furnished 75 percent of the cost of the Federal grant was considered to be unmatched.

grants ,

the unmatched total becomes $137, 864 506; with the further

addition of ~atched WPA

expenditures the total was $l

044, 378, 506.

To evaluate the significance of the rise in unmatched grants
it is necessary to recount briefly their development.
The mo re impo r-

tant modifications of the matching policy since 1930 are attributable to the exigencies of the depression period , but others have the earmarks of a permanent departure from traditional practice.

These

modificat ions have taken several forms.

In some of the Federal aid

functions Congress has since 1930 eliminated completely the matching
requirements for short periods.

In other instances the requirements

in an established Federal aid function have been altered by the

provision of funds in addi tion
but on an unmatched basi

to the exi sting Federal contributions

The effect of such a step may be to

permit the substitution of Federal for State funds being spent in
excess of the earlier matching requirement.

In a thi rd type of

policy change Congress has increased the grant and broadened the

purposes for which Federal money might be used, thereby assuming a
share of certain expenditures which prior thereto had been borne

solely by the States.
For several years the requirement that grants for highway construction be matched was abandoned completely.

This policy was in

part a reflection of the inability of the States to match grants in
a depression period and in part a consequence of the Federal

illAll .

these totals exclude payments to States in the nature of payments in lieu of taxation. Also excluded are comparatively small unmatched payments under various emergency highway appropriations.

~ .

..

Chart 12.

Relationship between per capita income in each State and per capita expenditures from State and local funds in 1940 to match Federal grants, excluding public assistance
grants

Per capita matching expenditure
Nle

Wyo.

' I

el.

200

300

400

500

600

700

Soo

Per capi ta income

For data upon which chart is

based, see table 2.

assumption of responsibility for unemployment relief and the decision
to include highways in the work-relief program.

The fi rat departure

from the highway matching requirement occurred in 1930 when Congress
appropriated $80 million as a " temporary advance " to the States with

which to match their regular Federal aid allotments.

Another " tem-

porary advance " of $120 million was made for the same purpose by the

Emergency Relief and Construction Act of 1932.

The fiction of the

temporary advance " was dropped enti rely in the National Industrial

Recovery Act and in the succeeding emergency acts making highway-

grant appropriations without any matching

requirement.

Highway policy has now returned toward its t
but not all the way.

radi tional form

Depression innovations left a residue of more
Grant s for the elimination of grade-

or less permanent new policy.

crossings and crossing hazards , first authorized by the National
Indust rial Recovery Act. continue to be made on an unmatched basi

this unmatched grant aids in paying costs that were formerly borne
exclusively by the States and localities.

The depression highway

legislation also paved the way for the continuation of Federal grants
for use on secondary road construction.

The grants for this purpose

must be matched , but since they are available for a matter that vas

formerly solely a State and local responsibility the effect probably
has been (varying from State to State):
(1) to lay no heavier burden

for matching since the prevailing level of State and local outlay
could be used for matching, thereby increasing the sums spent on this

type of road construction; or (2) to permit a substitution of Federal
for State or local funds.

The traditional highway policy was also altered to take into
account the particularly necessitous circumstances of a few States.

In 1936, Congress &brogated as to certain States for the fiscal year!
1936 and 1937 the requirement of " 50-50" matching of the highway

grant.

The 1936 amendment provided that when "the proceeds of all
. are applied to

special taxes on motor-vehicle transportation

highway purposes " and an insufficient balance remains to match the

Federal grants

all of such portion, of such apportionment as the

State is unable to match shall be available for expenditure

wi thout being

matched by the State or with State funds.

The

Federal Aid Highway Act of 1938 continued the exemption from the
matching requirement for the fiscal years 1938 and 1939.

The pro-

vision then lapsed but was revived for the fiscal years 1942 and 1943

by the Federal Highway Act of

1940.

The special dispensation was
but a few

enacted chiefly for the benefit of the Stat' e of. Arkansas ,
Another type of situation is represented by
agricultural extension policy.

other States have been able to take advantage of its provisions. !2/

alte~tions in

Most of the payments for agricultural

extension work are made under two

acts.

Those under the terms of the

Smi th-Lever Act are required to be matched (except for the $10, 000

flat grant to each State), while the addi tional s~s authorized

the Bankhead- Jones Act of 1935 are given on an unmatched basis.

The

chief effect of the increase by the 1935 act was to expand the service

ill 48 Stat. 993.
!:jJ For
an analysis of the Arkansas financial situation , see Ratchford . U., American State Debts , ch. xv.

without relying on State and local appropriations.

In all States the

proportion of the total extension service outlay borne from Federal
funds has thus increased.

Changes in vocational education policy
Grant s authori zed by the George- Deen

have been similar in character.

Act of 1936 (supplementary to payments under the Smith-Hughes Act)

are required to be matched only to the extent of 50 percent

(that is

$1 State and local money brings $2 Federal money) until the fiscal

year 1943, when 60 percent matching is to be required; and matching is to be increased by steps of 10 percent until the fiscal year

1947,

when matching of the entire Federal grant will be

required.

The

amounts to be matched under the George- Deen Act are about the same

as the matching requi rement

s of a prior act supplementa~ to

the

basic legislation; hence , the George- Deen Act placed no immediate
matching burden on the States.

I'n addition to

these modifications of the matching require-

ments in the older aided functions , a few of the newer acts are so
drawn as to grant all , or a portion of , the Federal aid without obligations to match.

The grant for child welfare services under the

Social Security Act is not conditional upon State financial partici-

patton.

The grants for public health work , for services for crippled
and for child and maternal health work under the Social

children ,

Security Act as well as the grants under the Venereal Disease Control

Some States apparently take more complete advantage of grant available under the George- Deen Act than of those under the Smi thLever Act which must be completely matched. Under the BankheadJones Act the grants under the Smith- Lever Act must be matched before the unmatched Bankhead- Jones funds for agricultural

extension work are available.

Act have to be matched only in

part.

It is under these acts of

small financial importance that some recognition of variations in

State fi seal capacity has been int roduced. Furthermore ,

although

the facts differ from State to State, a part of the matching raquire-

ments under these acts have been met by the use of preexisting State
and local expendi

tures.

The most striking departure from the matching principle during
the decade 1930- 40 was under the Federal Emergency Relief Act.

During the
percent of

years 1933, 1934 , and 1935, Federal grants cove red 70.

the total obligations incurred for

relief,

but the

ratio

of Federal funds to the total varied widely among the

States.

South Carolina the Federal Government bore 98. 0 percent of relief

costs; in Rhode Island , 39. 4 percent.

Or to state the situation con-

versely, State and local funds accounted for 2 percent of the total
in South Carolina; for 60. 6 percent in Rhode Island.

Not all the new legislation adopted in the decade 1930involved a departure from the traditional matching principle , but

there were special cir~~stances in several of the new acts.

The

Bankhead- Jones Act introduced the matching principle into the additional grants which it authorized for the State agricultural experiment stations , but the stations had been in existence for many years
most of them had built up State support , and generally the existing
level of State expenditure met the new matching requirements.

The

Wildlife Restoration Act contained a matching requirement , but on a

basis different from the customary 50-50

rale.

The Act provides that

the Jederal GoverDlllent shall bear not to " exceed
total estimated cost ofN

75 percentum of the

wildlife restoration projects.

In practice

a straight 75 percent ru.le is
from the 50-50

followed.

This act, thus , departed

ru.le and alao involved aid to State ~encieB which

were probably in a considerable meal1lure able to furnish
button from revenues already being collected.

theircontri-

The extent to which

the Federal aid system as a whole has , through foregoing development

de~arted from the straight 50-50 principle may be seen from table 7.

The public assistance titles of the Social Security Act thus
are the only important new grant legislation of the Ithirties"

which

followed in detail the t radi t tonal principle of the di vi lion of COlt s
of federally-aided services between Federal and State funds.

What can be inferred from the trend of congressional action

of the "thirties "
argued that the

on matching policy?

In one respect it might be
!C?~~hh

cumulative'

effec~. of
C'~""_C

~~c~ed in the

eeieral acts constitute a recognition by Congress that the point has
h~h"

been reached at which s~raight matching in the old tradition is no
"Ch_-",~,,~_C '-'-_C"~" h~'~""' hC"h '~~-C '" nn ""
. C _"ChC,-

longer a completely satisfactory basis for Federal grants.
_'~'~""C hO.~...cn

~h~' _~'h

.- 'C

It is , of

dete~ine the considerations governing the congressional deci sion in each instance. Undoubtedly many factors
course, impossible to
o~her than estimates of the revenue-raising capacity of the States

entered into each decision, but probably that was an element of no

mean impo rtance.
In another respect the rise of unmatched grants has a direct
-_..--.... C

bearing on one of the hypotheses under examination in this memorandum.

~~--~
Table 7.
State and local funds expended in 1939- 40 for matching Federal grants as percentages of Federal grants plus such State and local funds

Average

State
(1)
Nevada
New Jersey New York

per capita

1938-40 1/ (2)
$874 797 789 785 774 771 714 678 653 646 615 603 602 601 583 553 544
541

income

Federal grants plus State and local matching
expendi tures gj

State and

local
matching
expendi tures

Column (4)
as percentage of column (3)

(3)
$3, 673, 368 713, 842 134 653
888 336 614 007 615, 354 43, 210 469 815, 001 676 861 53, 077, 339 991 072 251 760 020 683 206 830 957, 726 320 , 817 953, 526 007, 159 421 835 168 727 482 812 302 295 548 472

(4)
$843, 584
488 . 501

(5) 23. 41.
40. 38.
38.

Connecticut
Delaware

Massachusetts
Rhode Island

California

Maryland

Illinois

Wyoming

Ohio

Washington Michigan

Pennsylvania
Oregon Montana
New Hampshire

454 419 543 999 085 676 009, 340 23, 361 308 689. 789 25. 355, 503 702 249 585, 061
518 961 992 37, 621 19, 220 868 191 , 4)~5 888 604 930 521 1 , 580 , 598 967, 497 722 487 066 630 151 907 426 812 519, 334 951 070 832 298 238 432 977 , 195 405, 220 547, 071 606 146 594 091 944 375 752 125 590 836 408 218

Colorado Wisconsin

524
509 508 502 493 483

Indiana
Minnesota
Vermont Maine

44. 33. 45. 43. 43. 43. 38. 39. 39. 44. 45.
45. 40. 43;3 35. 38. 37. 43. 45. 45. 40. 43. 44.

Missouri Arizona
Utah Idaho
Iowa

Florida

Nebraska
Texas Kansas

Virginia

West Virginia South Dakota North Dakota

Louisiana
Oklahoma New Mexico

476 469 466 451 449 449 420 420 407 404 386 365 354
349 343 325 309 307

135, 444 33, 462 027
950 379 470 116 056 814 393, 303 23, 421 408 695, 031 469, 972 39, 328 254 17, 258 192 999, 657 250 758 , 067 , 905 15. 957, 868 091 083 044 276

41.7
41. 43. 43. 45. 41.

493, 044 985. 897
069, 293
524 , 069 412 585 574 274 008 812 3, 581 , 526 149, 654 893, 913 870 400
660 578

Kentucky
North Carolina
Tennes see

Georgia

South Carolina
Alabama

Mississippi

Arkansas

305 300 269 249 245 198

13, 395, 000 17, 886 182 17, 617, 955
691 601

41.4
43. 40. 39. 40. 40. 39.

024 593 750 194 718 216 723, 635

_u-

From annual figures of DeDartment of Commerce.

Includes matched and unmatched Federal grants and expenditures from State and local funds for matching Federal grants. Data for Federal grants obtained from reports published by agencies administering the individual grants programs.
3J

See appendix for data of individual programs and sourbes used.

The argument has been advanced that one effect of inability or

dis-

inclination of the States with least resources to match Federal grants
might be the modification o!_~~~by offering unmatched or

matchin JlI_ quiremellts fQI'--n

alL~~

partially matched grants ~

- That c~~~_~~on

seems to have come about.

The consequence is probably the collection

and return of more funds in the form of Federal grants than would be

necessa~ to maintain an
tion system.

equivalent service level under an equaliza-

Another question remains to be examined , viz., the supposition
that the differential effects of the matching requirements might

affect adversely State and local activi ties
aid especially in the low-income States.

excluded from Federal

The scope of the analysis
, but the

has not been broad enough to provide data on this point
question is of

such great importance that some general comment should
That the distortion of State budgets through the

be made upon it.

di version of State and local resources from exi sting

uses to federally-

aided programs on a large scale would seriously cripple unaided
activities is a self-evident proposition.

A few States are well

known illustrations although the availability of Federal grants for
old-age aesistance has not been, of course, the sole factor leading
to the atypical expansion of the programs of old-age assi

stance in
of

these States.

Yet ,the

question re

MJ.h~~_~EjI_

~f~ects

the

Simple Federal collection and return to the State of origin through grants is not without its importance if it is assumed that the incidence of Federal taxation is markedly different from the incidence
of

over, some types of revenues while paid from the incomes of residents of the States are not as available to the States as to the Federal

the tax system of the State to which the return is made. More-

Gave rnment .

grant program in inducing St ~te and

~~~e.la~~~ori ti~.

~ote

:esour

p~ograms has actually tended to handicap functions
from non- Federal
"M_".

fi~nced solely

sources.

The consequences of differential weight of matching might be
expected to include the following, among others:

(1) States with lower per capita incomes might follow the

course of diverting funds from preexisting services in order to match

newly 0 ff ere d Fede ral

grant s

(2) They might fail to expand their unaided services in keeping
wi th

changing requirements while more prosperous States developed

their unaided services at a more rapid rate; or

(3) They might tax themselves more heavily than other States in
order to match Federal grants and to finance unaided activities.

The Federal Grant System and E qua lization

The emphasis in this memorandum on the burden of matching
Federal grants conflicts so sharply with the general feeling that the
States are being given something through grant s that some further

explanation would probably be ~ise.

It is undoubtedly true that many

States are enabled by grants to carry on the aided activities at
levels that they would be otherwise unable to achieve.

But it is

It is of interest that most of the States with high gasoline tax rates are the States with less resources. On January 1 , 1941, the following States had a rate of 7 cents per gallon: Florida cents Louisiana, and Tennessee; Arkansas had a gasoline tax of per gallon; Alabama , Georgia , Mississippi, North Carolina , and South Oarolina , had a 6-cent rate; Arizona , Idaho, Kentucky, Montana Nebraska , New Mexico, Virginia , Washington , and West Virginia had a 5-cent tax. All other States were lower. It is not suggested that the sole cause of rate altitudes is the necessity of higher- thanaverage tax effort to match Federal grants, but that is undoubtedly

a factor.

important to understand more preci sely the nature and limits of the

equalization "

accomplished through the grant system.

The Federal grant system as a whole is not built on the principle of equalization as that word is generally understood.

I t may

be said . however ,

to involve equalization defined in other ways:

(1) In one sense, the level of service in the poorer States
is probably at least doubled over what it would otherwise be.

The

effect is to reduce the disparities in levels of performance in the

aided services among the States; thus there is a tendency toward

equalization "

of service levels but no tendency toward an " equaliza-

tion" of burden in relationship to resources in the maintenance of

a minimum level of service as is inherent in a true system of

equali zat ion.
(2) In another sense the system as a whole may be considered

to equalize to the degree that it results in the collection of taxes
in wealthier areas and their expenditure in poorer areas.

"Equaliza-

tion " of thi s

sort is mes. sured by the difference between Federal tax

drain and Federal return in grants and services. I f the general conelusions of thi s analysi B are correct , the degree of thi s so rt of
equalization "
would be expected to decline as the total grants are

increased (in the traditional matching

form).

When fi seal

capaci ty

becomes a factor of importance and some States are able to match
grants to a lesser degree than others , the degree of " equalization

of this sort in the expenditure of a given sum of Federal money

declines.

(3) In another sense the grant system might involve what could

be called " equalization by s election.

That is to say, if those func-

tions were selected for subsidy (even under the traditional form) for

which there was a greater need in the States with lower resources, a
special type of equalization would occur.
-'h'_,

If such selecti

vi ty were

the practice. the inference from the greater burden of matching on

the poorer States might be that the aided functions were functions on
which the lower- income States should devote more of their resources

anyway.

A peculiar form of " equalization "

would occur.

There may be

an element of this which must be kept in mind in the interpretation
of charts 5 to 9 inclusive.

When functions of primary concern to

agriculture were the principal aided services there might have been

equalization by selection, "

that is, a Federal sharing of costs of

services needed primarily in agricultural States many of which
happened to be poo

As the variety of aided services increases

this sort of equalization probably disappears, but it must be remembered that several of the very expensive services-- the need for which
is probably relatively greater in the wealthy urbanized States--

continue to be borne exclusively from State and local

funds.

Equalization, in the sense of an increased percentage of
expenditure borne by ~~~~_
~r:~!,-_

s~:rla~" rela

v~_

~o\lr~es decline
system. '
In table 7

from State to State is not an effect of the grant

the division of the cost of all grant programs between Federal and

State and local matching funds is , shown.

The figures include all the

ordinary grants , the public assistance grants, and unemployment

securi ty grants but

tIP.! outlays are excluded.

I t should

be said again

that these figures , like all others in this study, exclude State and

local expenditures in excess of that used to match Federal grants.

If all these latter data were available a pattern like that in chart 1
might appear.
It is probable , however, that the pattern of chart 1

has ten~ed to decrease in importance in recent years as Federal payment s in many of the aided programs have been increased.

It will be observed from table 7 that the proportion of the

aggregate costs of Federal aid programs borne by Federal funds varies

quite little from State to State. Nothing like the pattern of chart 3

(;..J

----.::L--

emerges.

It will be noted that several States diverge from the cen-

tral tendency in table 7.

The explanations for these variations are

several.

In the public- land States the Federal grants for highways
funcis for

do not have to be completely matched and certain other
ways in these States do not have to be matched at all.

high-

In some of

the States with small total population the unmatched flat grants

operate to increase the Federal percentage of the whole cost of all
aided programs.

Incidentally, the figures in table 7 give some indication of

the degree to which the principle of straight 50-50 matching has been

departed from.
Policy Alternatives and Considerations
In brief the principal conclusions of thi s analysis respecting

the operation of the grant system

are:

(1) The dominant form of grant compels the States and locali-

ties to bear a share of the cost of the aided programs that as between
States becomes more burdensome from State to State as resources decline.
(2) Apparently the grant system has been expanded to the point

at which the effects of proposition (1) are becoming more pronounced.
as shown by difficulties which seem to confront the poorer States in
matching grants and the consequent excessive variations in service

levels.
(3) An incidental effect is probably that the expansion of the

grant system has adversely affected unaided services in the poorer
States although the present study has not established this to be the

case.
If these problems are to be dealt wi th o there are several alter-

native methods or a combination thereof that might be considered as

possibilities :
(1) Direct Federal administration and financing could be sub-

sti tuted in the case

of some of the existing aided programs or could

be used instead of the grant technique for future programs.

(2) Unmatched 'ederal grants could be used either in existing
programs (in whole or in part) or for future programs. (3) If the traditional form of aid should be offered for a

large. well-established State activity, such as education, States

could divert funds from such activi ty
burdens ,

to use in matching existing grants.

(4) Variable grants 0 vi th their
could be used.

corollary of variable matching

In the exercise of choice among these methods there are two

. broad types of relevant considerations.

In the adjustment of any

existing grant program ~r in the planning of any future grant program
there gre considerations peculiar to the governmental acti

vi ty

involved in the individual program.

Health ,

educat ion, social security,

and highways , for example , raise special problems of administration

and fi nance

Yet there are also broad questions common to all aided

act! 'Vi ties.

The present discussion will be limi ted primarily to

tl~Be broad considerations which will probably continue to be relevant
in the development and adjustment of the grant system as a whole.

Direct Federal Administration

By the use of direct Federal administration and financing
the problems of the grant system
as

they emerge in the present

analysis ,

could be solved.

Thus , for instance , if federally adminis-

tered public assistance were substituted for the present grants to

States the difficulties mentioned above could be avoided, but another
set of problems would appear.

The traditional American practice has

been that the maximum degree of decentralization practicable should
prevai 1

When issues of transferring powers from localities to the
, the

States or from the States to the Federal Government have arisen
burden of proof has been on the advocates of centralization.

The

burden of proof has been theirs , perhaps chiefly because they sought

to alter the existing situation , but also partly because it is almost
impossible to make a case for centrali zation if a given function can

be performed satisfactorily through decentralized administration.

Undoubtedly in many situations centralization of policy- formation and administration is essential to achieve particular ends, yet when

ei ther a more

or a less decentralized procedure will yield reasonably

satisfactory results the traditional choice would be in favor of the
more decentralized.

The choice between Federal administration and Federal grants
to States is a choice between two systems characterized by different
degrees of centralization.
decent ralized.

The grant system is .

of course , the more

Some of the results of this decentralization have been
It is important, then, to review some of the reasons

shown above.

why. in spite of these developments, there is still strong sentiment
in favor of the grant approach rather than direct Federal operation.

More specifically the following factors, among others. would affect
the choice:

(1) Direct Federal operation would place the entire financial
burden on the Federal Treasury.

(2) The grant technique permits variations in standards and
levels of service to fit local views and conditions , a matter that is
more difficult , although not impossible , under direct Federal operation.

(3) The grant technique permits a decentralization of both
legislative and administrative work.

Centralization of public

assistance ,

for example , would probably increase the load on individ-

ual Congressmen through requests for intervention by constituents.
In another way it would increase the load on Congress through the

assumption of the task of exercising surveillance over a national

administrative system.

The grant ' system permi ts the final settlement

of more issues at the State level.

Unmatched Grants
Another solution would be the use of the unmatched grant. this type of grant is meant the completely unmatched

g~nt, as those

for unemployment compensation administration, and the partially
matched grant that treats all the States alike.

All g~nts in which

a uniform ratio of Federal contribution above 50 percent of the total
cost of the aided service prevails would be partially matched.

Examples of this type of grant have been cited earlier, such as the
wildlife restoratio~ grant in which the Federal- State
75-25 rather than 50-50.

d~vision is

Essentially the partially matched grant

makes it possible to reduce variations in service levels but it
involves no allowance for variations in fiscal capacity from State
to State.

Some of the considerations relevant in considering the

desirability of unmatched and partially matched

g~nts are the following:

(1) The 100 percent grant , save in exceptional circumstances,

has little to recommend

it.

Apart from the administrative friction

which is inherent in it, it involves a complete separation of responsi~\I

. bill ty for raising

revenue from responsibility for its expenditure, an

. rY

arrangement not calculated to stimulate prudence in administ

ration.

(2) The partially matched grant retains the advantages of State

and local financial participation; it overcomes or may overcome
(depending on the precise figUres) the problem of differentials in

State fi seal capacity.

The chief objection to the partially matched

grant is that in the distribution of funds among the States the general
practice is to treat all States , rich and poor, alike.

Thus greater

Federal tax collections and return is necessary than under an equalization principle.

(3) Yet the partially matched grant, in the form in which it
has been used, has some virtues.

As might be inferred from the earlier

citation of its adoption in some fields , it has not attracted the
opposi tion that may confront an equalization grant for a service

fi scally impo

rtant

The desirability of the partially matched grant

would turn on whether the end was worth what it would cost the Federal
Treasury over the equalization method.

Finally, the partially matched

grant avoids certain technical difficulties inherent in the variable

grant.
The Variable Grant

Some type of variable grant involving the equalization prin-

ciple would remedy the problems outlined above without the disadvan-

tages of either the first or second techniques discussed but it would n~t be without difficulties of its own, quite apart from the technical
difficulties of ascertaining State capacity and need.
Some other

aspect s of the problems of variable grants may be noted:

(1) One effect of the variable grant might possibly be a reduc-

tion in total Federal collection and

return.

This might be accompli

shed

on a new grant program but is much less likely in the case of an
existing grant program.

In public assistance, for example, it would

probably be necessary that the minimum Federal contribution under a

)\"'

.)'

4\ -K" ,j N-' J/"
L:~)\

~riable grant

program be fixed at 50 percent.

The result would be

an increase of the total Federal outlay.

(2) Variable grants would narrow the range in variations in

levels of performance from State to State insofar as those variations
are attributable to differences in relative fiscal capacity.
Jt:r~~~~( the analysis of this ~~J",.po
-i/

Yet, if

study is correct, not all variation in performance

i;/)f

level is attributable to that factor.

(3) In no instance has the equalization device been used in

connection with a " percentage " or " open end" grant.

Wi thout a measure

of need which would fix a top limit to the total grant to a State
some difficulties might develop with the variable grant.

When one

dollar of State money will brinf three dollars of Federal money, the
leverage of the aided program in obtaining State and local funds might be great enough to lead to overexpansion under the " open end"

grant.

Some top limit might well be fixed and the normal way of doing

so would be through a definition of need or a precise definition of

the limits of the program in which the Federal Government would
part icipa te.

(4) In equalization of programs aided by State governments considerable emphasis usually is placed on a minimum tax effort by the
locality to qualify for the grant.

Under the system of general

property taxation it is relatively easy to fix a standard effort for
units of local government , or at least a

appa

nt standard effort.

From the differential efforts of the States under existing Federal grant programs it might be supposed that it would not be necessary to

worry about the fixing of a minimum State effort under an equalization

policy.

Yet it is conceivable that some States might be satisfied with
State and

a program that could be carried out with l e88 tbB n avera

local effo rt

The problem needs to be given some consideration.

(Incidentally, in view , of the variations in fiscal effort now being

exerted the probable effects of any provision of legislation inaugur-

ating an equalization system that requi red

States to maintain the

present level of expenditure from State and local funds should be carefully considered.

States, for example , now exerting higher than average

effort would have to continue to do 80 and the consequence, without a
saving clause , might be , with the increased Federal grant

, an overly

generous program in such States.

(5) Another question
aid programs.

whether to equalize one or all Federal-

Probably the ideal technique would be to apply an
In fact , however, the adoption

equalization formula to all programs.

of an equalization formula for a single program of great fiscal

importance (depending,

of course , on the range of the percentage ox"

Federal support from State to State) would mightily relieve State

finance.

In effect

, through the equalization grant s

States would be

permitted to divert some revenues now devoted to such a program to other

State acti vi ties ,
State activities.

or the way would be paved to develop other needed

On the other hand, the effects of the adoption of

the equalization technique in one federally-aided activity could be neutralized by the concurrent increase of grants under other federally-

aided programs governed by the straight 50-50 matching

rule.

(6) Another way to cope with the problem of variations from

State to State in fiscal capacity would be to continue the formulae

(j.,

for each aided program on the basis of measures of need with equal

Federal and State participation and to introduce a single unconditional

t;:.-:::'~ which increassd from State to ' State as per capita income declined would
yJ'/T

grant governed by relative State fiscal capacity. A per capita grant

serve the purpose.

The simplicity of such an arrangement makes it

attractive, but its adoption would require a disposition to regard

Federal- State

fiscal relations as a whole.

--- _m -- --

APPENDIX
The tables on the following pages indicate the amount of State and local funds expended in matching Federal grants- in-aid State under the specified programs for the fiscal year 1939and local funds expended in excess of amounts legally required for matching Federal grants are not included in the figures. The first table presents totals of the expenditure figures for I cont ributions in all grant- in-aid programs including sponsors connection with the work relief program administered by the Work Projects Administration. Also, two subtotals are presented, one of which shows total expenditures exclusive of sponsors contributions on WPA projects , while the other shows total expendi tures exclusive of both those for mat ching public assistance grants and sponsors I contributions on WPA projects.

40.

Brief explanatory notes concerning the data for each of the programs - as well as the sources of the figures are presented at the end of the tables. In a number of instances the State expenditure figures shown were not directly available from published data but were required to be computed , and in a few cases partially estimated, from data on Federal grants , taking into account statutory provisions with regard to matching

requirement s.

Appendix table l. Amount of State and local funds expended in 1939in matching Federal grants under specified programs
To tal,

State

programs

all

Total, excluding
WPA

Total, excluding public assistance and WPA

Total,
Alabama.

all States

Arizona Arkansas

California
Colorado

Connecticut
Delaware

Flori cia
Georgia Idaho

$920, 733. 466 15, 204. 654 729. 298 11.)19. 913 61. 773. 999 16, 063. 497 10. 029. 419 529, 543 12, 472. 220 14, 813. 812

$429. 738. 466

$147. 813, 766
537, 254. 007. 398

Illinois
Indiana

l41, 195

149, 654 832. 298 893, 913 37, 621, 999 967. 497 961. 419 992. 543 405. 220 008, 812

Iowa

Kansas Kentucky

Louisiana
Maine

Maryland Massachuset t s Michigan Minnesota.
Mis si s sippi Mi 3souri Montana

Nebraska
Nevada
New Hampshire
New Jersey New Mexico New York North Carolina North Dakota

017,340 39. 178. 085 37. 808, 061 27. 559, 907 12, 650, 400 28. 141, 070 8,300, 521 12, 839, 146 554. 584 051, 598 28,340. 501
4, 712. 29

61. 366,308 28. 756, 630 19. 171, 071 13. 728. 125 12. 441, 069 13, 231, 897 179. 334

23.361,308 14, 066, 630
10, 547. 071 752. 125 524. 069 985, 897 519,334 009,340 19, 220, 085

977 , 195

296. 595 932. 608 955. 230 824, 671 656. 325 156, 869 532, 897 1.385. 534
1,546, 740

l77, 5l2

840. 613 499, 099 130, 697 284. 719 718. 143 241. 920

16,585, 061 14. 151. 907
14, 951, 070 930,521 606, 146

870, 400

1,580, 598
488, 501 069, 293

843. 584

Ohio Oklahoma Oregon

Pennsylvania
Rhode Island South Carolina

South Dakota

Tennessee
Texas Utah
Vermont
Virgin ia

Washington
West Virginia

Whc on sin Wyoming

81, 075, 17. 242. 585 794, 044 57. 287. 503 20, 351, 578 986. 604 53. 989, 445 583. 676 10. 870,526 159, 215 16, 716, 274 35, 407. 375 643. 432 524, 812 614, 091 i 7. 778, 249 11, 853. 836 26. 938. 487
810. 790

31. 518 454 412,585 493. 044 25,355, 503 12. 660, 578 888, 604 26 . 19l, 445 868, 676 581, 526 411. 215 574. 274 16. 944.375 238, 432 426, 812 594. 091
702, 249 590, 836 12. 722. 487 687. 790

761. 685 119, 761 170, 207 920, 200 736, 970 175, 121 836, 746 482. 684 765, 298 693. 201 1,399, 693 847. 954 116. 985 097. 844
106 , 603

3,382.378
1, 843 , 504 658. 845 805, 176

297, 326 808. 015 508. 674 456, 575 814, 132 770, 112 142, 291

2.357,549
004. 536 958, 787 050, 090

of St~te and local funds expended in 1939- 40 Appendix table 1. Amount Continued matching Federal grants under specified prograal--

in

A.gricul tural

Agrieul tural

state
Total,
;~' Alabama
all Statel

experiment

stationl

Forestry
$2, 119, 451 62, 532
66, 615
204 , 460

extension lerv1ce
$4, 708,508 167, 713 24, 410

Vocational educat ion
$13, 592, 830

Vocational
rehab il i..

tation

$2,340, 030
82, 695 12, 423 63, 983 65, 942 22, 431 20, 658
010 30, 802

$1, 926, 469 55, 090 357, 648
68, 895

Arizona
Arkan 18 I

717

California
Colorado

Connecticut
Delaware

996 16, 154
863

127,344 133, 113 47, 676 42, 212
9, 844 64, 124 175, 578 29, 517 172, 054 124, 867 131, 036 99, 368 156, 130 111, 934 42. 279
57. 721

Florida
Georgia Idaho
Iowa

87,523

13, 719
86, 13 7

!llinoh
Indiana

Kentuc~ Louisiana
Maine

Kanlas

Maryland

NaSlachusetts
Michigan Minnesota
Mi II our i

Mississippi
Montana

Nebraska
Nevada
New Rampehire
New Jersey

New Mexico
New York
North Caro

Una

North Dakota

Ohio Oklahoma Oregon

Pennsylvania
Rhode I Bland
South Carolina
South Dako ta

13, 761 89, 832 102, 628 ' 24, 676 93, 015 68, 451 20, 176 134, 690
264 59, 465 24, 432 74, 784

62, 723 64, 855 50. 051 78. 938 55, 133 20. 692 28, 550 18, 182 -66, 968 56. 798 72, 651 76, 968 15, 503 38, 777 461 357 30. 526

106, 612 83, 926 62, 370 10, 135 14, 939
932 3, 947 20, 234 54. 831 47, 921 16, 798 34, 606 134, 738 96, 626 57, 079 19, 260 29, 919 516 405 18, 208 40, 803 965 74, 514 71, 497 200 12, 214 21, 960

37, 347 135, 189 115, 205 146, 357 154, 839 31, 263 79, 794
835

19, 662 61. 602 27, 040 181, 136 205, 259 49, 747 184, 390 136. 483
39, 644 265, 919
449

213, 791 581, 214 128, 341 134, 342 68, 832 170, 216 401,586 81, 047 681, 833 372, 908 261, 851 193. 423 315. 980 263, 210 80, 157 162, 609 367,319 512, 540 288, 829 286, 399 423, 290 84, 907 163, 612 42, 976 57, 432 355, 065
82, 755

25, 771 130, 613

15, 038 14, 144 284 32, 395 43, 221
620

122, 003 51, 947 28, 752 130 971 55. 33, 690 13, 829 16, 832 40, 758 74, 866 36, 248
~7, 983

121,342 434, 994 83, 838
649 . 295

148,563 55, 123

Tennessee Texas Utah
Vermont

149, 365 10, 504 10, 472
71, 145 29, 516 53, 813

Virginia
West Virginia
Wi Icon sin

Washington
Wyoming

60, 225 6, 760

472 55, 773 3. 365 36, 614 54, 761 864 . S, 830 44, 480 162, 831 37, 823 95, 484 633

120, 446 51, 608 148,567 295, 115 21, 720 22. 196 143, 396 59, 617 109, 342 123, 559 14, 542

313, 144 118, 139 961, 458 73. 571 150, 696 85, 596 350, 100 740, 984 80, 090 63, 202 321, 898 170, 094 186, 258
351, 136 73, 388

850 857 62, 972 614 139, 192 62, 798 13, 526 83, 586 47. 654 21, 085 145, 530 296 26, 873 507 51, 187 97, 474 10, 000 254 45, 786 22, 097 26, 647 85, 928 970

082 12, 241 22, 561

---

-----

Appendix table l. -.A.moun t of State and local funds expended in 1939- 40 in matching Federal grants under specified programs-- Oon t inued

State
Total,
Alabama
all Statel

Highwqs
$102, 495, 238

Wildl ife

restoration
$384, 722

Soldiers I
home B

$978, 770

Arizona Arkansas
Colorado

2.378, 767
139. 913 957. 970

7,313 13, 408
162

california

Connecticut

238,322 668, 799

13. 889 12, 634
055 706
12, 714

Florida
Georgia Idaho
Indiana

Delaware

1,535,
883,
~9.

717, 624 560, 625
506

242, 294 17, 046 66, 730

Illinois

6 9, 810

20. 27

Iowa
Ian sa s

Ken tucky

Loui siana Maine Maryland

Massachusetts
Michigan Minnesota

Missouri
Mon tans

Mississippi

789, 800 923, 743 973. 713 097, 997 652, 259 004. 473 944, 574 1.581. 812 464, 942 109, 789 008. 200

13.
7, 590 g, 043 2, 711

12, 031 120, 765
265 26, 686 15, 045

5, 341 441 1, 809 26, 143 9, 779
805

80, 258 26, 978 60. 024

434.390 844.326
350. 925
38), 136

602
853

15, 708
637

Nebraska
Nevadat New Hampshire
New Jersey
New Mexico

20, 883
937 26, 512
137

New York
North Carolina North Dakota

Ohio Oklahoma Oregon

Pennsylvania
Rhode Island South Carolina South Dakota

Tennessee Texas Utah
Vermont

Virginia
Washington
West Virginia
Wi sc onsin

Wyoming

560, 625 519, 571 109, 679 572, 813 669,561 761. 992 120, 667 419, 077 263, 115 854, 251 560, 625 527, 446 496, 977 391, 773 161, 147 539, 632 560, 625 087, 711 582. 889 244, 339 775, 312
880, 839

1. 252 720
821

12, 984
11 , 696

885

14, 317
882 990 24, 133 160 5, .330 640 603 26, 258 7, 733 573 8, 543 11, 997 405 7, 837
7, 538

961 71, 833

32, 447 13, 531

18,336

207

47, 635

26. 605
679

--~ -----

---------

----

Appendix table l. --Amount of State and local funds expended in 1939-40 in Oontinued matching Federal grants under specified programl--

Public health Venereal Title VI

State
Total,
Alabama
all States

Arizona Arkansas
Colorado

California
Connecticut

Delaware

Flori~

Georgia Idaho
Iowa

Indiana

Illinois
Kansas Kentucky
Loui sians.

Maine

Maryland Massachuset t s Michigan Minnesota

Miuissippi
Mi ssouri Montana

Nebraska
Nevada
New Hampshire New Jersey

New Mexico
New York

- North Carolina
North Dakota Op.io

~oma
C)n

By1 vania

~ji~' ?~~~~na
S&u.t)J.'

Tehhe' 8s'

P~ ta

Texas Utah
Vermont

West Virginia Wi sconsin
Wyoming

Washington

Virginia

Act Act $6. 200, 075 $2. 942. 844 $3. 147. 036 $3, 721. 316 $3. 256, 417 65, 000 87. 147 80. 153 72. 756 120. 440 13, 040 077 690 14,529 32. 41, 236 37, 44, 920 64, 456 47, 600 77,357 85 . 644 148, 907 147, 427 130, 426 156, 820 305. 612 21, 168 43. 625 51, 456 23, 965 66, 522 42, 154 49, 187 50, 192 38. 045 90, 022 12, 850 25, 594 5 . 625 12,324 586 36. 565 56, 578 51, 008 106. 298 51. 989 86. 810 78, 000 101. 013 143, 468 93. 103 11, 674 28, 000 35,353 210 774 50. 184. 584 212, 022 154, 821 18l, 235 336. 336 84, 941 86, 212 119, 710 150, 468 74, 236 70. 283 995 63. 972 76. 47.392 117. 584 65.315 095 48. 969 78, 82. 102 38. 064 68, 511 81. 471 848 60, 550 74, 142, 928 50, 906 63, 894 11, 722 103, 964 71, 354 19, 400 46. 153 43, 755 16, 532 45, 002 40, 000 49, 015 875 62. 161 56. 107, 164 103, 703 87, 996 ~, g19 99. 886 224. 190 129. 688 119, 177 110, 822 9 , 794 222, 916 62,540 65, 250 76, 349 141, 952 50, 818 48, 683 76, 169 35, 000 86, 052 56. 822 110, 000 113.256 81. 5~2 59. 467 186. 556 15, 589 45, 061 754 10. 0 5 45, 876 28, 781 37.571 a3, 155 660 28, 658 10. 000 11. 480 1.557 984 14, 400 15, 000 12. 735 31, 288 11, 308 16, 587 106, 000 82, 343 107, 561 104, 606 192, 920 11. 104 35, 885 11, 181 37, 880 54, 008 261. 988 304, 916 153. 034 297, 398 637, 468 86. 691 115, 112 85. 087 88, 100 183. 562 16.515 48, 156 12, 282 38. 200 33. 866 181. 430 130, 681 U8, 797 151, 440 294. 938 86, 701 59. 000 65, 979 100, 976 54, 071 25, 016 430 000 67, 45. 20 , 946 67. 400 272. 580 168. 134 154, 6 149. 766 440, 164 18. 031 24. 32.3~1 17, 418 46. 968 42. 118 65, 9 1 71. 405 112. 746 53, 087 16, 939 491 26, 29, 994 35. 552 83, 783 75. 671 81. 0 11, 782 ~7 ' 1I.~7, 803 175 . 248 134. 952 166. 988 2 6. a64 80 12, 301 ~9 , 245 11, 578 3~' 50 962 39. 10, 000 207 1. 828 13, 744 60. 270 062 66. 313 73, 70. ~87 149. 100 - 41, 006 628 46. 591 59. 89, 232 34. 16 45. 000 101. ~35 59, 504 35, 8 96, 174 77, 088 102. 23 533 126, 112 56. ~ 5 10, 000 17. 000 1 . 283 4, 90
768

Social Security

Di sease
Cont rol

for crippled children

Servicel

Maternal
and child

State
employment

lervices

heal th

services

... ;

---

---

Appendix table l.- -Amount of State and local funds expended in 1939-40 in matching Federal grants under specified

programa-- Cont inued

State
Total, all

assistance
States
$219. 098. 700 028, 000
1 . 255, 100

Old-age

Aid to the

Aid to dependent

blind
$5, 748. 700 30. 100

children
$57, 077.300 554.300 518. 000 360. 900 451, 000 115. 000

Alabama

Arizona Arkansas

California
Colorado

Connecticut

Florida
I d8.ho

Delaware

Georgia

665.300 27. 243. 700 618.300 650. 700 175. 400 2.538. 600 207. 400
100 16, 428, 700 914. 700 6.520. 900 880. 400 2.361. 200
11 7.

51. 800 27. 100 428. 200 103.500 26. 000
166. 700

62, 900

Indiana
Iowa

Illinois

36.500
295. 700

458. 000 561. 000 527, 000
901. 000

99 , 000

Kansas Kentucky Loui siana
Maine
M8I';1'land

201.500 131. 400
89. 500 168. 700 84. 200

078. 000
149. 000 324. 000 496, 000 712. 000 772, 000 800. 000
725, 000 424, 000 012, 000

214.500
1. 641. 100

Massachuset t s Michigan
Minne so ta

Mississippi
Missouri
Montana

882, 400 13. 588. 900 593.300 046. 600 920.300 489. 100

151.500 100. 000 135. 100 29. 900
20. 900 76, 900

1.310,500
680. 500 360, 900 633. 100 640, 500 330, 600 15. 662, 700 089. 600 905,300 16. 629. 700
7.386, BOO

Nebraeka
Nevada
New Hampshire New Jersey New Mexico New York North Carolina North Dakota

Ohio Oklahoma Oregon

Pennsyi vania
Rhode Island South Carolina
South Dako ta

582,900 11. 218. 600 774, 800 917, 700
1)69, 000
2,317, BOO 481. BOO

43. 200 90. 800 21. 000 385. 800 176, 000 17. 900 453. 200 195. 400 68. 200
600

Tennessee
Texas Utah
Vermont

53. 500 23. 200 105. 800 19. 600
12, 700
177 , 200

139. 000 064. 000 318, 000 622, 000 030. 000 472. 000 166. 000 696, 000 394. 000 254. 000 283. 100 313. 000 11. 000 642, 000

Virginia
Washington
West Virginia
Wi scons in

Wyoming

1. 724, 600 521, 100 934. 100 137,500 346,500 423. 900 464.500

31. 100

668, 000 116, 000 445, 000 030. 000
1 , 161 , 000

78, 800 274. 800 24. 200

065, 000 151. 000

Appendix table l. --Amount of State and local funds expended in 1939in matching Federal grants under specified programs-- Continued

State
Total, all States

WPA

Alabama Arizona.

Arkansas

Co lorado Connect icut

Cal ifornia

Delaware

Florida

Georgia Idaho

Indiana

Illinois

Iowa Kansas Kentucky Loui siana Maine Maryland

Massachusetts
Michigan Minnesota
Montana

Mississippi Mi s souri
Nebraska
Nevada
New Hampshire
New Jersey

New Mexico New York
North Carolina North Dakota

Ohio Oklahoma Oregon

Pennsyl vania
. South Caro lina
South Dakota

Rhode Island

Tennessee Texas Utah
Vermont

Virginia
Washingt on

West Virginia

Wiscon~in
Wyoming

$490, 995, 000 10, 055, 000 897, 000 426, 000 24, 152, 000 096, 000 068, 000 537, 000 067, 000 805, 000 164, 000 38 , 005 , 000 14, 690, 000 624, 000 976, 000 917. 000 246. 000 660, 000 008, 000 19, 958, 000 21, 223. 000 13, 408, 000 780, 000 13, 190, 000 4,370, 000 233. 000 711, 000 471, 000 19. 852, 000 643, 000 49. 557, 000 830, 000 301, 000 31, 932. 000 691, 000 098, 000 27, 798, 000 715, 000 289, 000 748, 000 142, 000 18, 463. 000 405, 000 098, 000 020, 000 076. 000 263. 000 14, 216, 000 121, 000

Appendix

Sources and Explanations
Agricultural e eriment stations. Expenditures for matching grants under the Bankhead- Jones Act. Source: U. S. Department of Agriculture, Office of Experiment Stations, Re ort on the Agricultural E eriment Stations , 1940, p. 260.

Forest

Expendi tures for matching grants under the ClarkeMcNary and Norris- Doxey Acts. Source: U. S. Department of Agriculture, Forest Service, Forest Service Manual , Section 2 of Vol. X , Administrative Statistics, 19 0, pp. 17- 19.

Agricultural extension service.

Expenditures for matching grants Lever, Capper-Ketcham, Clarke-McNary, Norrisunder the SmithDoxey Acts. The payments under the Clarke- McNary and NorrisDoxey Acts are direct appropriations to the Department of Agriculture and are not grants to States although they must be offset by funds from sources within the States. Source: U. S. Department of Agriculture, Extension Service, Division of Business Adminis-

t ration.
Vocational educ&tion. Expenditures for matching grants under Data computed the Smith-Hughes and George- Deen Acts. from special tabulation obtained from U. S. Office of Education, Vocational Division, and from Di st of Annual Re orts of the State Boards for Vocational Education to the U. S. Office of Education, Vocational Division, Fiscal Year Ended June 30, 1940.

Source:

Vocational rehabili tation.

Expendi tures for

matching grants

under title V , sec. 531 , of the Social Security Act of 1935. Hearings Before the Subcommittee of the Committee on Appropriations , House of Representatives, Seventy-seventh Congress , first session, on the Department of Labor-Federal Security Agency appropriation Bill for 1942, part 2 , p. 107.

Source:

Expenditures for matching grants under Federal Aid hwa Highway Act, as amended, for matching Federal funds for regular Federal aid highways and secondary portionment figures of Federal funds requiring matchi used as ve of tate DeciiUie-Ol""t11e fiCt that State-' utIayQ8t&~ are-' avalI~ble only on a project basis and not on a fiscal year basis. Source: Bureau of Public Roads, Annual Re ort, 19 9, pp. 8-9.

roads.

ca

Wil

Wildlife restoration. Expanditures for matching grants under fe-Re;toration Act of 1937. The figures for State and

local expenditures required for the matching of Federal grants have been derived from data on Federal obligations incurreQ rather

than actual Federal expenditures. Source: Special tabulation
Service.

from U . S . Department of Interior , Fish and Wild.l ife

Expendi tures for matching grants for State and ~ol Source: Annual Federal homes for disabled soldiers and easu ry ~n the State of the th~ Se Rep ..ihe Tr 940 , pp. 822- 823. !!nanc~s f ~r Fiscal Year Ended June

~lar

sailors.

Pub

art~~ 1h!!~~!~ ?Et: !.~~!~JL~~~~_!.2~i; Part I
~!h....~~he

Expenditures for matching grants under Title VI of the Social Securi ty Act and Venere8~ Disease Control Act. the Source: Hearings B 2!!. 1~~Q.~~ ~1.:!~ co~~~~ RaE a t i '! ~~t2'!!~~~ - s i Ap"pr ~!.~1!.~;!~1.

o~ f

ee oL
or-

itt!

~1l

Fe~_
9 B.

nd 522, and special

~gen~

tabulation for certain States from Federal Security Agency, Office of Administrator.

Expendi tures budgeted by States led c for matching grants under title V , part 2 of the Social Security Twentl: !ghth ~~~ual Re ort of the Secreta Act Source: Labor f~ the Fiscal Year En~~~~~!-20 94Q , p. 15

Service!-!~i

Maternal and child heal th services.

Expendi tures budgeted by

States

p. 15 .

Sec ;:~~r.. y oLLa~

fOr-matChIng-grantS~nder-title V , part 1 of the Social the Security Act. Source: Twent -eig1l !E~!:l

t~ ~~al

or for the Fiscal Year Ended June

, 1940

Expenditures budgeted by States for Federal matching grants under the Wagner-Peyser Act. ial Security Board , Bureau of Employment Securi ty Agency, Soc

State . em

Source:

Securi ty,

Sta! istration . (processed table
Fis~

tate

l~~ent S

curi t

Expenditures for matching Federal grants Social under title I of the Social Security letin, February 1941 , p. 58; special adjustme t made Secu~~~ for South Carolina and Iowa as a result of addendum to FederRl grant for assistance which was used partly for assistance in the former State and entirely for assistance in the latter.

Old~~assis

Act. Source:

Aid to the blind. Expenditures for matching Federal grants for Does not &;srstance under title X of the Social Security include expenditures for matching Federal grants for administrat ion since data not yet available when tables were prepared. February 1941 , p. 60; special Source: So~ adjustment made for South Carolina , Michigan, and Iowa as a result of addendum to Federal grant for assistance which was used partly for assistance in the first two States and entirely for assistance

Act.

!~~~~Bulletin,

in Iowa.

Aid to d

relate to Source: calendar year 1940 instead of fiscal year 1939Social Security Board, Bureau of Public Assistance , Source of Cial T es of Public Assis tance-and Funds E ended for the rocessed release dated May 10, 1941) 19 General Relief DuX and special tabulation of preliminary data for funds expended on administrative costs from Bureau of Public Assistance.

grants under title IV of the Social Security Acto Data

end eE~ chU

Expendi tures for

matching Federal

40.

Work Pro ects Admi

!stration. Sponsors ' contributions reported in connection with work relief projects. Source: Annual Re ort of the Federal Works A enc for the Fiscal Year Ended June
436:4
37.

19I40, pp

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