The Trump administration focused on reducing red tape. Another critical area needing attention is the numerous requirements federal agencies impose on state grant recipients. The White House Office of Management and Budget aims to address this by proposing a new rule called the Regulation for Federal Financial Assistance. This would reduce unnecessary conditions on federal grants that states receive.
The existing rules often impose unrelated requirements on states, diverting funds meant for citizens. One example is the disparate impact liability theory. This often channels funds away from intended recipients. To combat federal overreach, my organization evaluates states using a ‘Federalism Scorecard.’ A key measure is whether state legislatures approve the conditions attached to federal grants. Currently, 17 states require such legislative approval.
Tracking grant requirements revealed unexpected conditions. For instance, the Department of Housing and Urban Development in 2023 required applicants to promote climate resilience, not just homelessness services. The Department of Education gave preferences to applicants with culturally informed discipline policies and energy-efficient spaces. The Department of Agriculture prioritized applicants advancing climate change priorities in their composting programs. These conditions appear unrelated to Congressional grant objectives.
The new proposal aims to restrict grant conditions to align with Congress’s original purpose, reducing costs and delivering funds more efficiently to their targets. Current ‘green tape’ sometimes forces states to spend significant own resources. For instance, Florida spends an additional 40 cents per federal dollar received. By addressing this, the new rule would ensure grant money reaches its intended use without unnecessary burdens.
Despite these limitations, necessary reporting requirements would remain to prevent misuse of funds. The proposed changes refocus grants on Congressional purposes, avoiding illegal practices or advancing political agendas. With this initiative, the administration aims to ensure federal grants effectively support state programs that citizens depend on daily, instead of being hindered by excessive conditions.
Jonathan Wolfson is a senior fellow at the State Policy Network’s Center for Practical Federalism.
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