State and Local Governments under Federal Grants: Toward a Predictive Theory
In the United States, federal grants-in-aid to state and local governments can be said both to have a long history and to be quite new. Their history goes back to the nineteenth century, when the federal government granted land to state governments for the establishment of state universities. Yet the cash grant as an instrument of domestic policy of the national government emerged on the scene in a big way only with the New Deal. Moreover, until the Truman period, grants were made almost exclusively to state governments. Under Truman, direct federal-local grants were initiated. In the 1970s, these grants, made directly from the national government to local governments, grew rapidly and became a major factor in American intergovernmental fiscal relations. Because cash grants on a major scale, and especially direct federal-local grants, are a relatively recent development, it is not surprising that the theoretical literature on grants does not have an extensive empirical base. In a survey of the literature of the subject published in 1977, Edward M. Gramlich stated that one of the barriers to understanding how fiscal subventions from the national government affect the states and localities receiving them is the "lack of an underlying theory of the behavior of state and local governments."'