Jonathan Wolfson
Red tape reduction is a hallmark of President Trump’s administration. But there’s another problematic set of strings that deserves cutting too: the multiple strings federal agencies impose on state grant recipients. Luckily for the states (and the citizens who count on state programing), the White House Office of Management and Budget has some really big scissors and is prepared to free states from a tangled web of “green tape” that comes when they accept federal grants.
In May, the office announced its brand-new proposal: Regulation for Federal Financial Assistance. That proposed rule would release states that accept federal grants from multiple unlawful requirements federal agencies have for years been attaching to grants.
For example, states will no longer be required to apply disparate impact liability theory, which that usually has nothing to do with the grants Congress has authorized and diverts limited funds from the citizens who are supposed to benefit from the dollars in the first place.
My organization annually scores states on a “Federalism Scorecard,” which identifies state policies that best protect citizens from federal government overreach. One major criterion is that state legislatures affirmatively decide whether to accept federal grants and the strings attached to them. We’ve been encouraging more states to join the 17 that already require legislative approval before accepting or using federal grants. That effort stems from tracking the requirements attached to federal grants, usually issued in the form of guidance or included in a what is known as a “notice of funding opportunity.” The Center and states that now track these funding requirements have found some requirements no reasonable person would have ever expected.
A few recent examples make the point. The Department of Housing and Urban Development’s 2023 homelessness services grant required applicants to advance “climate resilience,” not merely provide services to the homeless. The Department of Education created “supplemental priorities” for their grant programs that gave competitive preference or even limited applications to school districts and states that were implementing “culturally informed discipline policies” and creating “energy-efficient spaces,” not merely fulfilling the goals of the program in line with Congressional appropriations.
And the Department of Agriculture’s 2023 Composting and Food Waste Reduction Cooperative Agreements required grant reviewers (and thus applicants) to prioritize applicants that advanced the department’s priorities on climate change, equity and environmental justice. It wasn’t enough just to support local food-waste reduction programs.
Although some of these requirements may not be problematic on their own, it is difficult to argue that Congress intended for the grants to include entirely unrelated policy strings. And it is equally difficult to assume state legislators and governors would expect these kinds of strings to come along with federal grant dollars.
These new limitations on grant conditions to things that actually serve Congress’s original purpose have the added benefit of reducing project costs and shortening the time it takes for grant dollars to reach their intended targets. If the green tape were a few dollars for reporting, or to verify that dollars are being spent in line with the grant’s original purposes, it would be hard for states to complain. After all, they are receiving significant federal dollars each year. But in many cases, merely accepting the federal dollar requires the state to spend much of its own tax revenue to meet the requirements. The James Madison Institute has estimated that Florida currently obligates itself to spend an additional 40 cents for every federal grant dollar it accepts.
That is why it is great news for the states and for citizens everywhere that the White House Office of Management and Budget is poised to limit this practice. This would still allow agencies to require reporting to ensure grant money is going where intended — not toward fraud or unlawful purposes like political campaigning or discrimination. But the proposed rule refocuses grants on the purpose Congress intended, which also has the benefit of not making states do illegal things or advance a particular political ideology just to access federal dollars.
Federal grants support state programs that citizens rely on each day. By cutting the green tape, the Trump administration is making sure those grants can actually do their job — instead of getting tangled in strings that please Washington bureaucrats but do nothing for the people the money was meant to help.
