History of Grants

The historical origins of the federal grants-in-aid system predate the Constitution. In fact, Congress provided for grants of land under the Articles of Confederation as early as 1785. There was, however, little development in the system until the 20th century. Certain conditions existed during the late 18th and 19th centuries that limited federal aid to states and localities. During the pre-Civil War era, proponents of states’ rights and minimalist national government prevailed, where states existing. During this period, the trans-Mississippi west consisted largely of federally-administered territories; indeed, more than half of the trans-Mississippi west entered the Union after the Civil War. The post-Civil War era was one of corporate dominance and weak government. Despite these conditions, the federal government did provide aid to states and localities on an ad hoc basis to address natural disasters, civil disturbances, westward expansion, and the need for internal improvements.

The grants-in-aid system began to take its current form in the early 20th century. Financial grants created during the 1910s included grant mechanisms such as matching requirements and conditions, which are now common in grant programs. In the 1930s, President Franklin Roosevelt’s Administration, prompted by the conditions of the Great Depression, worked with Congress to accelerate the development of the grants-in-aid system as part of the New Deal program of social relief, financial reform, and economic recovery. The grants-in-aid system again grew significantly during President Lyndon Johnson’s Great Society initiative of the 1960s. Many of these programs were specifically focused on urban areas and disadvantaged populations.

The Nixon Administration and Congress initiated changes in the system, emphasizing block grants, as well as establishing general revenue sharing, a program that distributed funds to state and local governments without programmatic requirements. The Reagan Administration also worked with Congress on substantial change, consolidating dozens of categorical grants into broader block grants and slowing the growth of the grants-in-aid system. Since the Reagan initiatives, there have been few significant changes in the grants-in-aid system.