STRENGTHENING THE PARTNERSHIP IN INTERGOVERNMENTAL SERVICE DELIVERY
ACCOMPANYING REPORT OF THE NATIONAL PERFORMANCE REVIEW OFFICE OF THE VICE PRESIDENT Washington, DC September 1993
Executive Summary 1
RECOMMENDATIONS AND ACTIONS
FSL01: Improve the Delivery of Federal Domestic
Grant Programs 7
FSL02: Reduce Red Tape Through Regulatory and
Mandate Relief 13
FSL03: Simplify Reimbursement Procedures for
Administrative Costs of Federal Grant Disbursement 15
FSL04: Eliminate Needless Paperwork by Simplifying
the Compliance Certification Process 19
FSL05: Simplify Administration by Modifying the
Common Grant Rules on Small Purchases 21
FSL06: Strengthen the Intergovernmental
Each action is followed by a number in parentheses that indicates the necessary avenue for effective implementation. Appendix A organizes all actions according to these categories.
(1) Agency heads can do themselves
(2) President, Executive Office of the President, or
Office of Management and Budget can do
(3) Requires legislative action
(4) Good idea, but will require additional work, or
may be better suited for future action
ACIR Advisory Commission on Intergovernmental
AFDC Aid to Families with Dependent Children
GAAP Generally Accepted Accounting Principles
GAO General Accounting Office
HHS Department of Health and Human Services
JOBS Job Opportunity in Basic Skills
JTPA Job Training Partnership Act
NCSL National Conference of State Legislatures
NGA National Governors' Association
NPR National Performance Review
OIRA Office of Information and Regulatory Affairs
OMB Office of Management and Budget
USCM United States Conference of Mayors
To understand the state of intergovernmental relations today, consider the state of the U.S. Advisory Commission on Intergovernmental Relations (ACIR), a once-proud, federally funded institution that has fallen on hard times.
Among the functions outlined in its charter, ACIR is supposed to bring together representatives of the federal, state, and local governments to discuss common problems; provide a forum to discuss how to coordinate grant and other programs requiring intergovernmental cooperation; provide technical assistance to determine how legislation in Washington would affect the federal system; recommend how best to allocate governmental functions, responsibilities, and revenues among levels of government; and suggest how to coordinate tax laws and administrative practices to achieve a more orderly, less competitive fiscal relationship among levels of government.
Twenty years ago, ACIR was a prestigious institution that produced numerous analytical reports on the intergovernmental impact of federal policy. Its role was augmented by the establishment of intergovernmental offices in the Office of Management and Budget and the General Accounting Office.
But in recent years, ACIR has lost stature, influence, and resources. In 1986, Congress cut ACIR's budget by 53 percent. Most recently, Congress considered eliminating all funding and sharply reduced it further. Today, ACIR sometimes has trouble attracting a quorum to its meetings.
The ACIR's decline is just one reason--albeit a symbolically important one--why state and local officials view the federal government as unconcerned about the intergovernmental effects of its decisions. More important are the federal government's decisions about how much money to give states and localities, how to package that money in grants and other programs, and how to require that states and localities offer services that Washington cannot afford to provide itself.
THE HEALTH OF THE SYSTEM IS IN QUESTION.
The health of our intergovernmental system may strike some as a boring, merely philosophical matter. In fact, the importance of a well-functioning intergovernmental system can hardly be overstated. We cannot achieve the National Performance Review's (NPR) broad goals--cutting red tape, putting customers first, empowering employees to get results, and cutting back to basics--without a new approach to intergovernmental partnership in delivering services to the public.
In addition, a well-functioning system is central to Americans' quality of life and Washington's ability to pursue a domestic policy agenda. Americans spend hundreds of billions of dollars each year to implement public policies at all levels of government. Hundreds of thousands of dedicated public employees, along with thousands of other committed citizens, work hard to solve human and societal problems, helping one another and striving to build a better country.
Despite all of these efforts and money, Americans increasingly feel that public institutions and programs aren't working. In fact, serious social and economic problems seem to be getting worse. The percentage of low-birth-weight babies, the number of single teens having babies, and arrest rates for juveniles committing violent crimes are rising; the percentage of children graduating from high school is falling; welfare rolls and prison populations are swelling; median incomes for families with children are falling; more than half of children in femaleheaded households are poor; and 37 million Americans have no basic health care coverage or not enough.
Why? At least part of the answer lies in an
increasingly hidebound and paralyzed
intergovernmental process. A significant number of federal domestic programs are administered through federal grants to state and local governments--for everything from wastewater treatment to well-baby care--or through income transfers administered jointly by federal and state governments. Together, these grant and income transfer programs will amount to an estimated $226.1 billion in fiscal 1994. Notwithstanding years of debate at all levels about grant consolidation and simplification, the number of grant programs--now more than 600--continues to escalate. Of these programs, 451--75 percent--are grants of $50 million or less.[Endnote 1]
DUPLICATION AND OVERLAP.
So, too, do the problems of duplication and overlap. Take, for instance, the case of federal programs designed to help children and their families. Today, 10 departments and two independent agencies administer more than 140 such programs. More than 15 percent of them are directly administered by the federal government, more than 40 percent by state governments, and another 40 percent by local, private, or public groups.[Endnote 2]
Unfortunately, the myriad of federal mandates and regulations that accompany grant programs are cumbersome and very costly to administer, lack a coordinated implementation strategy between levels of government, and are not achieving the intended outcomes. Each separate program has its own array of rules and regulations that must be observed, regardless of their impact on the effectiveness and quality of customer service. States and localities have limited ability to customize service delivery by integrating programs because of competing, often conflicting federal rules and requirements that accompany each grant program.
In Cincinnati, for instance, local officials were working to restore a severely blighted but historical area. They were using federal Community Development Block Grant funds in conjunction with public and private resources to create new and rehabilitated affordable housing for residents of the area. But when they sought to combine these activities with federal job training funds to hire and train unemployed persons in the construction industry, conflicting federal regulations got in the way.[Endnote 3]
To the taxpayer "a tax is a tax" and "a service is a service" regardless of which level of government is responsible. Reinvention of the federal government must recognize this reality and must place a high priority on improving government management at all levels.
Meanwhile, Washington has increasingly imposed mandated requirements and regulations (often without adequate funding to cover costs) to help realize policy objectives. As of December 1992, at least 172 pieces of federal legislation were imposing mandates on states and localities. "The federal government's own fiscal weakness has not made it any less eager to tell states and localities what to do," wrote Alice Rivlin. "Indeed, when its ability to make grants declined, the federal government turned increasingly to mandates as a way of controlling state and local activity without having to pay the bill."[Endnote 4]
A Vision for the Future. In a perfect world, we would consolidate the 600 federal grant programs into broad funding pools, organized around major goals and desired outcomes--for example, safe and secure communities, a competitive workforce, healthy and self-sufficient families and children, or a clean environment. In addition, we would streamline administrative mechanisms, providing flexibility to account for regional differences and the diversity of needs; ensuring accountability by measuring performance and outcomes, not transactions and errors; and driving program design and management responsibility down to the point of contact between government and the end consumer.
To create this perfect world, we would have to massively reform the existing system of intergovernmental grantmaking. Such a reform would touch every federal department and agency, every congressional committee and subcommittee, every special interest and advocacy group, and each and every one of the thousands of states, counties, cities, townships, and special purpose districts across the country.
Opportunity for Change.
Previous reform efforts, mainly designed to consolidate grants and reduce administrative red tape, have largely flopped. President Reagan achieved limited success in his early efforts to create a system of block grants, but subsequent efforts to expand the model to other categorical programs have almost universally failed.
While the political obstacles to enacting such proposals continue to seem almost insurmountable, an opportunity for change may be at hand. Even Congress itself is becoming exasperated with the micromanaged nature of grantmaking.[Endnote 5] As one congressional staffer noted, "There is a tremendous pent-up legion of followers in Congress [and elsewhere] if forceful leadership is provided . . ." Recent actions, such as passage of the 1991 Intermodal Surface Transportation Efficiency Act, demonstrate some willingness by major congressional committees to approach grantmaking more rationally. In addition, the National Governors' Association and the National Conference of State Legislatures have developed a proposed grant consolidation plan, the spirit of which many see as feasible to provide increased flexibility to states and localities.
Even with an enthusiasm for change that breaks sharply with history, the federal government will not achieve its goals easily or quickly. We cannot achieve improvements solely, even primarily, through federal action. As a result, each partner in the system must work collaboratively with the others-- federal, state, and local--to refine the concepts and recommendations outlined in this report. Such collaboration has already begun; in mid-1993, President Clinton and Vice President Gore held discussions with the nation's governors and mayors.
Goals of Change.
Specific solutions can be perfected and refined over time, but the basic needs are, and have been, clear for more than a decade:
The federal government will have to work with states and localities to define a more viable federal partnership, find the optimal balance between flexibility and accountability, while simultaneously addressing the budget constraints imposed by the federal deficit.
Federal, state, and local government attention should focus on mutually agreed-upon measurable outcomes for public service delivery. The intergovernmental relationship should be a partnership, not an adversarial or competitive system. Federal financial support should be provided to achieve broad goals, but also should provide latitude and flexibility in how to accomplish them and be tailored to real local needs. Rather than defining accountability by inputs, transactions, error rates, and failure to progress, the federal government should hold state and local governments accountable for performance. The system should support and reward what works, rather than imposing rules and sanctions on the majority because of errors or omissions by the minority.
In this report, we offer the following five broad recommendations on how to improve the system:
--improve federal grant administration through simultaneous bottom-up and top-down initiatives;
--cut red tape and eliminate roadblocks by allowing waivers of regulations that detract from accomplishing program objectives or interfere with effective service delivery;
--simplify cost reimbursement procedures, saving time and money;
--eliminate needless paperwork by simplifying the compliance certification process and the common grant rule on small purchases; and
--reinvent ACIR and promote collaboration between the federal government and its state and local partners across federal policymaking and administration.
If implemented, our recommendations will result in:
--savings in overhead and administrative costs at all levels;
--much greater flexibility up and down the line to design solutions that work;
--more effective concentration of limited resources; and most importantly
--a much greater likelihood that federal, state, and local objectives will be achieved.
Recommendations and Actions
Improve the Delivery of Federal Domestic Grant Programs Background
In the past 12 years, the trend toward federal categorical grantmaking has escalated dramatically-- to more than 600 federal grant programs that will spend an estimated $226.1 billion in fiscal year 1994. Some grants are distributed on a formula basis; many others on a competitive or discretionary basis; and still others as entitlements depending upon the enrollment of eligible participants.
Federal grantmaking is not an end in itself. Funds are intended to promote federal policy objectives and contribute to the resolution of real problems affecting real people. Yet, state and local governments, and the clients and customers of the programs these federal funds support, face a maze of different and sometimes contradictory rules, regulations, administrative procedures, and program standards and requirements across this myriad of grants.
NEED FOR CHANGE
The current system of federal grantmaking fragments the ability of government at all levels to address people's needs in an integrated manner. By establishing discrete and often incompatible eligibility standards, and administrative rules and requirements, the proliferation of categorical grants has made government at all levels less effective. Block grants, intended to overcome some of the limitations of categorical programs, are not immune from red tape and unintended consequences. These problems have contributed to the frustration of individuals and families that depend on federal assistance, and have added to taxpayer and customer cynicism about government's ability to manage.
For example, there are more than 140 federal programs directed toward assisting children and their families. These funds are administered by 10 different federal departments and two independent agencies. According to a Congressional Research Service report, over 15 percent of the programs are directly administered by the federal government, more than 40 percent are administered by state governments, and another 40 percent of the programs are directed through local private or public groups.[Endnote 1] The largest number of programs are aimed at providing educational and social service support. The largest amount of dollars, however, is designated for income support and nutritional programs. Each federal grant program has a distinct definition as to who it is intended to serve. For example, programs such as Aid to Families with Dependent Children (AFDC) and Food Stamps are aimed at children and their families that meet specific income criteria--although the definition of income and assets differs for the two programs. In other programs, such as the social services block grant, recipients may be children or children and families or certain unrelated adults.
The Evolution of Fragmentation.
Government programs are established as needs are identified. For example, a job training program is established to train the high school drop-out so that she or he can obtain a job and support the family. Another program is established to help someone recover from drug abuse, be rehabilitated from injuries in an accident, or recover from a crime. Yet another program is established to help a person obtain safe, decent, and sanitary housing that is affordable. All are worthwhile programs.
But government service providers are hamstrung to integrate these programs if the customer happens to be the same person. Programs are operated by separate agencies (often in different geographic locations), by separate people with different expertise, and in accordance with rules and regulations developed and overseen by different federal agencies.
In the past few years, there has been increasing recognition at all levels of government that individuals and families, subordinate governments, special districts, and businesses and corporations may simultaneously be the client of a wide variety of programs. The failure to see the intergovernmental system from the perspective of the citizen-customer not only perpetuates inefficiency and wasted time, effort, and money, but also leads to poor program design and a significantly reduced probability that the goals and outcomes desired will be achieved.
Example of Fragmentation.
One by one, block and categorical grants and their accompanying rules and regulations may make sense; but in combination they often defeat the very purpose for which they were established and undermine, rather than enhance, the ability of service providers and managers to be truly accountable for outcomes.
For example, the Job Opportunity in Basic Skills (JOBS) program is funded through the U.S. Department of Health and Human Services (HHS) and is administered at the local level by social services departments. The JOBS goal is to help citizens become self-sufficient (get jobs) by providing education, work experience, job search training, and job placement.
The Job Training Partnership Act (JTPA) is funded through the Department of Labor and is administered at the local level by community groups known as Private Industry Councils. The goal of this program is to help citizens become self-sufficient by providing training that leads directly to employment.
Although these programs are intended to be compatible, they are seldom used together because: 1) they have different accounting requirements, 2) they have different evaluation procedures, 3) they have different eligibility requirements, and 4) funds from the two programs cannot be pooled. A person wishing to take advantage of both programs, therefore, must go to two sites and be qualified under each program's guidelines. Then they must attempt to arrange the training they need under the programs and coordinate them. On an administrative level, the programs require separate staff, separate offices, and other supporting costs. Consolidation of the programs would benefit the customer, the community, and the federal government.
Or take, for example, a recent situation where local officials were working to restore a severely blighted but historic area of a city. Federal Community Development Block Grant funds were being used in conjunction with local public and private resources to create new and rehabilitated affordable housing for residents of the area. The city wanted to combine these housing and community redevelopment activities with federal job training funds to hire and train unemployed persons in the construction activity. However, this was not possible because of the conflicting regulations of the separate federal programs.[Endnote 2]
For decades, top-down proposals to solve the problems
of federal grant management and administration have
been offered. Most have failed, or failed to be
completely effective, because of a combination of
special interest politics, lack of effective interdepartmental
planning and decisionmaking at the
federal level, and competing and sometimes conflicting needs and priorities among and between other levels of government. The National Performance Review believes that the approach to the problem should be turned, quite literally, upside down.
Instead of concentrating federal efforts on revamping all 600 grants, reconciling the thousands of rules and regulations, and anticipating every possible instance when flexibility and latitude might enhance actual program outcomes at the state or local level, the responsibility of identifying the obstacles and designing the best solution should be given to the states and localities themselves.
Let the grant consolidation solutions come from the bottom-up, in response to actual barriers and obstacles in the field. Create a partnership that offers administrative and regulatory relief when and where it really matters, and let the learning that process could generate gradually build a body of knowledge about how the overall system can or should be reformed.
Precedent for "bottom-up-type" local initiative exists in some individual federal agencies and programs. EPA is experimenting with greater flexibility and latitude in meeting regulatory and grant requirements; the Job Training Partnership Act provided for fairly extensive local public-private partnership and autonomy; the Intermodal Surface Transportation Efficiency Act (ISTEA) provides for some greater local discretion.
Notwithstanding some of these experiments, the bottom-up concept will challenge many long standing federal attitudes and bureaucratic assumptions:
--states and localities can't be trusted to protect minority rights and ensure fairness and equity;
--if the federal government doesn't punish errors and omissions they will become the norm--federal systems have to prevent errors (even if it means impeding results);
--statutory and administrative rules and regulations can control jurisdictions or grant recipients otherwise inclined to fraud, waste, and abuse;
--each and every congressional committee and federal department and agency has a right to design its own standards and priorities--regardless of how it affects the citizen-customer;
--the federal government is more competent and exercises better judgment than state and local elected officials and managers;
--flexibility and latitude are inconsistent with performance and delivery on national programmatic goals; and
--the federal government can design how best to do things, as well as the overall outcomes desired, from desks and offices in executive agencies and the halls of Congress in Washington, D.C.
Each of these notions has had merit at points in our history and with respect to specific, often notorious cases of abuse. But they do not provide a foundation for reinventing government or refocusing our collective intergovernmental effort toward outcomes instead of process.
To create a bottom-up solution, federal legislation will be required. Omnibus legislation that authorizes states and localities to consolidate funding streams and reconcile contradictory rules as a matter of right (for smaller amounts) and as a matter of federal-state-local negotiation for more complicated and comprehensive proposals should be the goal.
Incentives should be provided in the legislation to encourage states and localities to design solutions from the citizen-customers' perspective--to integrate services at the point of contact between citizencustomers and the government and to eliminate their own state and local bureaucratic barriers to more effective outcomes.
Partnership should be the hallmark of the proposal-- between the federal and lower levels of government, and among and between the public, private, and private non-profit sectors at the service delivery level. Incentives to obtain broad stakeholder commitment to new ways of service delivery and to reduce paperwork, monitoring, and process controls should be designed.
At the same time legitimate federal interests must be protected and compliance with broad cross-cutting regulations (equal employment opportunity, worker health and safety, for example) ensured. By focusing on what outcomes should be rather than precisely how to achieve them, both the flexibility needed of states and localities and the need to protect legitimate federal interests can be met.
Reviewers of the bottom-up concept have raised a number of legitimate concerns and questions:
--What funding streams will be included?
--If states and localities are allowed to consolidate some smaller amounts and reconcile regulatory conflicts associated with them as a matter of right, how high or low should the threshold be?
--How can accountability to Congress and federal departments be ensured?
--How can yet another bureaucratic structure and more process to implement such a program be avoided?
--How will these recommendations be affected by, or can they affect, administration initiatives in the area of health and welfare reform?
--How would conflicting eligibility standards be reconciled and what are the potential consequences of letting states and localities choose the least restrictive rules?
Each of these issues can be successfully addressed if federal, state, and local officials collaborate on drafting the necessary legislation and pursue its implementation in good faith. The following suggests how a bottom-up solution could work--it is intended to be illustrative rather than prescriptive.
How Consolidation Would Work.
After a grant award of federal funds has been made to a state, or local government agency, that recipient agency may elect to consolidate all or part of the grant program with another program serving the same customers.[Endnote 3] To be eligible for consolidation, the following requirements must be met:
Other Features of the Bottom-up program
To ensure consistency with federal priorities and interests and to minimize red tape:
--The cross-cutting requirements with which grant recipients must comply (e.g., civil rights compliance) would be unaffected by this approach.
--Regular reporting on progress or service delivery goals to both federal agencies and congressional committees is assumed.
--One of the primary impediments to effective service delivery integration is the confusing array of often conflicting rules and regulations. Under the concept of bottom-up grant consolidation, the consolidating agency is authorized to resolve any conflict between the statutes or regulations of consolidated programs, by selecting which statute or regulation will be followed. The intent is to empower the integrating state or local agency to resolve such conflicts in favor of a customer-oriented program of service.
--A state or local government that has successfully integrated, or which demonstrates plans to effectively integrate, a federal grant program with other services will be accorded preference in future discretionary funding of the consolidated program.
--A federal program that is administered through states is eligible for consolidation at the point of service delivery. If the consolidating agency is a unit of local government, the state as well as the responsible federal agency must be notified of the consolidation, and on large consolidations should be included in the decisionmaking review.
2. Support proposals for Federal-State Flexibility Grants. (3)
While NPR advocates a broadly based bottom-up grant consolidation option, it will not be suitable or desirable for many jurisdictions where current accounting standards, contradictory rules, etc. are not major problems. Even in these cases, however, improvement in the overall system of grants administration can reduce cost and improve administrative effectiveness. Complementary to the bottom-up approach, NPR also recommends support for consolidation proposals that provide increased flexibility to states and localities that complement federal programs.
One such proposal, developed by the National Governors' Association (NGA) and National Conference of State Legislatures (NCSL), would consolidate ". . . approximately 55 existing programs, with a funding level of approximately $12.9 billion in fiscal 1993, into flexibility grants in six broad areas: education reform, workforce quality, air and land environmental management, water quality, defense conversion, and housing." The proposal is designed to respect the jurisdictional authority of congressional committees (see Appendix B).[Endnote 4]
The NGA/NCSL proposal was intended to affect only funds going to state recipients, although local government advocates are concerned that some passthrough monies may be affected. NPR's support for flexibility grants is conditioned upon the fact that there be no increase in grant funds going to overhead costs, or a related diminution in program allocations at the point of service delivery--concerns held by local governments that now receive some of these funds directly from the federal government.
3. Establish a Cabinet-level Enterprise Board to oversee new initiatives in community empowerment. (2)
In order to improve the implementation of federal domestic service delivery, the President should establish a Cabinet-level Enterprise Board. The Board would lead the federal government in a new effort to improve the coordination and integration of major domestic program service delivery initiatives. This board will be committed to solutions based on "bottom-up" initiatives and will approve large, cross-agency bottom-up grant consolidation proposals generated by state and local agencies, as well as by federal agencies. The board will be responsible for coordinating the administration's community empowerment agenda, beginning with the nine zones and 95 enterprise communities that passed Congress as part of the President's economic plan.[Endnote 5] The board will empower innovative communities by reducing red tape and regulation of federal programs.
The board should be chaired by the Vice President. The Assistant to the President for Domestic Policy and Assistant to the President for Economic Policy should serve as vice-chairs. The following cabinetlevel officers should serve as members of the board:
Secretary of Commerce
Secretary of Labor
Administrator of EPA
Secretary of HUD
Secretary of Education
Secretary of Agriculture
Secretary of HHS
Secretary of the Interior
Director of OMB
Administrator of SBA
Secretary of Transportation
Secretary of Treasury
Director, Office of National Drug Control Policy Chair, Council of Economic Advisors
It is recommended that the board include as regular, ex-officio members, representatives of state and local government and the private non-profit sector.
NPR recommends additional flexibility to give federal agency heads more discretionary authority to improve service delivery by waiving rules and regulations. This new authority also will provide additional incentives for cabinet officers to collaborate on overall improvements in service delivery. In addition to the Cabinet-level Enterprise Board, agency heads should collaborate by bringing management teams together outside of Washington, closer to the point of service delivery, and by working with their intergovernmental partners, state and local governments, to improve the service delivery system.
Department of Health and Human Services, HHS01: Promote Effective, Integrated Service Delivery for Customers by Increasing Collaborative Efforts.
Department of Education, ED02: Reduce the Number of Programs the Department of Education Administers.
Reduce Red Tape Through Regulatory and Mandate Relief
The number of new requirements imposed on state and local governments have increased dramatically during the last decade. As of December 1992, at least 172 separate pieces of federal legislation were in force that imposed mandates on states and localities--many of which were partially or wholly unfunded.[Endnote
There is no more constant complaint by states and localities about any federal practice than the imposition of unfunded mandates on lower levels of government. In Reviving the American Dream, Alice Rivlin notes that: "The federal government's own fiscal weakness has not made it any less eager to tell states and localities what to do. Indeed, when its ability to make grants declined, the federal government turned increasingly to mandates as a way of controlling state and local activity without having to pay the bill."[Endnote 2] She goes on to say: "Mandates add to citizen confusion about who is in charge. When the federal government makes rules for state and local officials to carry out [whether or not they have the resources to do so], it is not clear to voters who should be blamed, either when the regulations are laxly enforced or when the cost of compliance is high."[Endnote 3]
The ability of federal departments and agencies to grant regulatory and mandate relief is more limited than many may appreciate. Authority to waive programmatic regulations is currently limited to research and demonstration projects under the auspices of the secretaries of Health and Human Services and Agriculture (and is statutorily granted in the Social Security and Food Stamps laws, respectively). While some latitude exists for other agency and department heads to modify, extend, and adjust executive regulations and compliance deadlines (e.g., in the Environmental Protection Agency), the majority of the most onerous federal mandates and regulations are statutorily imposed, affording little room for negotiation or flexibility.
Need For Change
As in the case of categorical grant programs, while each individual mandate and regulation may seem justified and reasonable, in combination they impose burdens on states and localities that make it less likely, rather than more likely, that overall federal goals can be met. The cumulative impact may force states and localities to adopt cost-ineffective strategies simply to achieve simultaneous compliance, or forgo the ability to make real progress toward critical benchmarks because they lack sufficient resources to simultaneously achieve all the goals set by the statutorily or administratively required deadlines.
Legislation should be enacted to allow federal management flexibility over domestic service delivery policies.[Endnote 4] The Government Performance and Results Act addresses this issue in part by encouraging "management and flexibility waivers." However, greater latitude is needed. The execution of domestic public policy requires that managers have the freedom to manage, to weigh the issues involved when program requirements are in conflict, and to make operational decisions to best realize policy objectives in the dynamic world of implementation. Legislation to authorize greater executive discretion toward these ends will markedly enhance the ability of administrators to achieve desired national policy outcomes, because they will be able to significantly improve the efficiency of the intergovernmental service delivery systems.
It should be noted that special federal concern has been expressed about the extension of waivers to entitlement programs.[Endnote 5] These concerns should be given serious consideration.
2. Issue a regulatory executive order addressing the problems of unfunded federal mandates and regulatory relief. (2)
The new executive order should:
Streamline Management Controls, SMC08: Expand the Use of Waivers to Encourage Innovation.
Simplify Reimbursement Procedures for Administrative Costs of Federal Grant Disbursement
Approximately $19 billion of federal grant funds is used to reimburse states and localities for administrative costs. Administrative costs include:
--the federal portion of expenses states incur to administer public assistance programs such as Aid to Families with Dependent Children (AFDC), Medicaid, and Food Stamps;
--the direct and indirect administrative expenses associated with federal formula and block grants; and
--the indirect costs of the various state departments that administer federal discretionary grants.
State and local governments account for administrative costs under a system established 25 years ago through OMB Circular A-87, "Cost Principles for State and Local Governments," which sets forth principles, standards, and processes for determining charges to federal grants.
Because states and localities incur costs that benefit both the particular jurisdiction and a wide variety of separate federal programs, a complex allocation process is used to determine the equitable distribution of these common costs between the states and federal government, and across multiple federal grant programs.
OMB Circular A-87 requires states to develop a cost allocation plan that must be reviewed and approved by the federal Department of Health and Human Services (HHS), to determine:
--the dollar amount of central services (e.g., purchasing, personnel management, and financial management) to be allocated to the various state departments; and
--the methodology for determining the amount of charges for central services that are funded on a billed or fee-for-service basis.
In addition, state agencies administering federal public assistance funds must receive prior HHS approval of plans for allocating administrative costs among the various programs that they administer.
A number of large local governments must also receive advance approval of cost allocation plans. Other local governments receiving federal assistance are required to develop cost allocation plans and indirect cost proposals, and retain them for audit. Also, each state agency receiving federal funds negotiates an indirect cost rate with the federal department from which it receives the largest amount of funds.
Need for Change
Concerns regarding the effectiveness of the system in controlling costs, as well as the accounting and allocation burdens the current system imposes, have been documented in the General Accounting Office (GAO) and HHS audit reports and expressed by federal, state, and local officials in interviews.
Since 1980, administrative costs have often grown disproportionately compared to the growth in programs. Faced with their own fiscal pressures, many states and localities have explicitly pursued policies for administrative cost maximization, sometimes using consultants and firms specializing in federal cost reimbursement maximization strategies.
A healthy debate exists about these strategies--with states and localities arguing that they are simply claiming their fair share after years of unintentional underreporting, and federal managers asserting that this is simply gaming the system. Either way, there is little question that uncontrolled growth in administrative costs could continue indefinitely in the face of severe federal deficit constraints.
The HHS inspector general has also concluded that not enough is being done at federal and state levels to ensure that only allowable costs are being paid. The inspector general estimates that hundreds of millions of dollars in reimbursements have been paid historically for costs that would be disallowed if the federal government had the time or resources to conduct exhaustive and detailed audits. However, in the past several years, the staff resources available in HHS to audit as well as to review and approve cost allocation plans and negotiate indirect cost rates has decreased significantly, further diminishing the federal capacity to oversee the system.
An HHS audit report states that the system for accounting for administrative costs has ". . . grown arcane and has slowly degenerated into a highly technical accounting and allocation maze."[Endnote 1] Clearly, the existing system is overly burdensome for both state and local governments. For example:
--Huge disparities exist among and between jurisdictions.[Endnote 2]
--States are often required to negotiate indirect cost rates with as many as 14 separate federal agencies.
--Thousands of cost allocation plans are prepared annually for no purpose other than satisfaction of OMB Circular A-87 requirements
--Significant costs are incurred at the state and local levels to administer the costing methods such as random moment time studies required by the plans.
Various approaches to changing the system have been considered by members of Congress, OMB, HHS, the Congressional Budget Office, the National Association of State Budget Officers, and the National Governors' Association, among others. In the past, no single proposal has had sufficient support for adoption. Nevertheless, there remains broad consensus that change is badly needed.
Modify OMB Circular A-87 to provide a fee-for-service option in lieu of cost reimbursement. (2)
OMB should modify Circular A-87 to give states and localities the option of electing a fixed fee for service in lieu of the current method of administrative and overhead cost reimbursement.
This approach would fix the rate of administrative costs for individual states and localities based on each jurisdiction's experience, but allow total fees paid to increase or decrease in proportion to program expansion and contraction. The measure to which administrative costs are most sensitive (e.g., the number of clients, number of payments, program costs expended) would be determined for individual programs.
The actual administrative costs would be ascertained for individual states and localities for a base period, and expressed as a percentage or unit cost of the measure identified.[Endnote 3] Administrative fees would be paid in the form of a lump sum from each program by applying this percentage or dollar amount to the selected program measure for each year.[Endnote 4] Although states or localities would have to absorb any deficits in relation to actual costs, they would retain any savings that they could develop through efficient management practices. This would maximize incentives for cost containment and efficiency and provide an opportunity for gainsharing by more efficient jurisdictions.
An administrative fixed fee system reduces expenses by eliminating costly preparation and submission of allocation plans and indirect cost proposals, as well as by eliminating the applicability of federal requirements for maintaining cost records and reporting, and federal audits of administrative costs. Further, the fixed fee approach ensures that future changes in administrative funding are proportionate to program growth, increasing the predictability of federal costs and concentrating precious resources on service delivery. The system would also provide new incentives for cost efficiencies in states and localities.
We estimate half the governments will elect the fee for service option, leading to federal savings of $3.3 billion over five years.
Eliminate Needless Paperwork by Simplifying the Compliance Certification Process
States and localities are required to provide assurance of compliance with 18 cross-cutting federal requirements contained in the SF-424, "Application for Federal Assistance," every single time a grant application is submitted to an individual federal agency. In addition, there are other cross-cutting assurances not contained in the Standard Form. These assurances, which consist of two pages in the standard federal grant application for state and local governments, stipulate that the applicant will comply with statutes such as the Civil Rights Act of 1964, the Hatch Act and the Davis-Bacon Act (see Appendix C). States and localities submit thousands of grant applications each year and are currently required to recertify each time.
Need for Change
Thousands of pages of duplicative certifications are being needlessly prepared, processed, and stored every year.
Simplify grant compliance certifications by modifying OMB's requirements. (2)
OMB should modify Circular A-102, "Grants and Cooperative Agreements to State and Local Governments," to require that the common grants management rule provide that all cross-cutting certifications may be submitted by incorporating them by reference into grant applications. Further, OMB should modify the SF-424 to eliminate the assurances and to add the following statement: "By virtue of this signature, the applicant certifies that it: 1) incorporates into the application by reference the cross-cutting assurances contained in the common rule; and 2) will comply with the assurances."
Simplify Administration by Modifying the Common Grant Rules on Small Purchases
Currently, OMB Circular A-102, "Grants and Cooperative Agreements to State and Local Governments," sets a limit of $25,000 in the aggregate for the use of small purchase procedures by local governments to secure services, supplies, or other property.[Endnote 1] Small purchase procedures allow a grantee to use relatively simple and informal procurement methods (e.g., obtaining price or rate quotations over the phone from an adequate number of qualified vendors).
Need for Change
Local governments have found the $25,000 limit to be overly restrictive, especially for the purchase of small vehicles that often exceed this amount. For example, to procure one small van with federal funds to satisfy Americans with Disabilities Act requirements, grantees must formally advertise and solicit sealed public bids. This requirement delays the procurement process and prevents grantees from acquiring rolling stock quickly.
Modify OMB Circular A-102 to require that the common grants management rules increase the dollar threshold for small purchases by local governments from $25,000 to $100,000. (2)
Reinventing Federal Procurement, PROC4: Establish New Simplified Acquisition Threshold and Procedures.
Strengthen the Intergovernmental Partnership
To develop a seamless and high quality system of public services for the 21st century, the federal, state, and local governments must work together in fundamentally more effective ways than has historically been the case.
Even though the institutional support historically provided at the federal level for intergovernmental collaboration has been less than perfect, it has been even further eroded during the past decade. Intergovernmental offices in the Office of Management and Budget (OMB) and the General Accounting Office (GAO) were cut significantly. Funding and political support for the Advisory Commission on Intergovernmental Relations has been radically reduced, and its credibility and quality of objective analysis undermined. Congressional governmental operations committees have moved their focus away from complicated and often contentious intergovernmental issues, while the Executive Office of the President and departmental intergovernmental relations staff have, in recent years, increasingly turned their attention to constituent service issues, rather than substantive intergovernmental policy--let alone service delivery or problem-solving concerns.[Endnote 1]
Need for Change
The decline of intergovernmental institutional support systems has resulted in a sense among state and local officials that the federal government is unconcerned about the intergovernmental effects of its decisions. This is reflected in the decreased communication and lack of effective input into federal decisionmaking in both the executive and legislative branches.
Twenty years ago, the U.S. Advisory Commission on Intergovernmental Relations (ACIR) was a prestigious and heavily used advisory institution, producing numerous analytical reports on the intergovernmental impact of federal policy. The intergovernmental forum that ACIR initiated was eventually strengthened with the establishment of intergovernmental offices in OMB and GAO.
In recent years, ACIR has lost stature, influence, and resources. For example, in 1986, the House Appropriations Committee reduced ACIR's budget by 53 percent. And, in the past five years, ACIR has not had a quorum at more than one quarter of its meetings.
Some have argued that ACIR should be allowed to die a peaceful death. Yet, when you examine the law originally creating ACIR, its mission and purpose seem directly relevant to today's critical issues of intergovernmental service delivery, problem solving, and effective performance. The original charter sought to:
--bring together representatives of the federal, state, and local governments for consideration of common problems;
--provide a forum for discussing the administration and coordination of federal grant and other programs requiring intergovernmental cooperation;
--give critical attention to the conditions and controls in the administration of federal grant programs;
--make available technical assistance to the executive and legislative branches of the federal government in the review of legislation to determine its overall impact on the federal system;
--encourage discussion and study at an early stage of emerging public problems that are likely to require intergovernmental cooperation;
--recommend the most desirable allocation of governmental functions, responsibilities, and revenues among the several levels; and
--recommend methods of coordinating and simplifying tax laws and administrative practices to achieve a more orderly and less competitive fiscal relationship between the levels of government and to reduce the burden of compliance on taxpayers.
Under the charter, ACIR's membership is bi-partisan, with elected and appointed officials from the federal, state, and local levels, as well as citizen members. The members are appointed by the President, Speaker of the House, or President of the Senate. While all of the vacancies for the current two-year membership have been nominated or filled, they have not been selected in a coordinated or focused process.
ACIR has a relevant charter, a framework for true intergovernmental collaboration, and the potential for continuous improvement and performance measurement of the intergovernmental partnership. The institution does not need to be abandoned; it should be reinvented to provide an ongoing vehicle for bipartisan intergovernmental policy debate and research.
Its mission needs to be more clearly focused on performance measurement, long-term improvements in intergovernmental grantmaking and regulation, and assessing intergovernmental fiscal impact. The President should work closely with the Speaker of the House, the Vice President, and representatives of the organizations that have traditionally nominated the membership (National Governors' Association, National League of Cities, etc.) to collaborate in identifying a slate of candidates for the next full-year term (FY 1994) who are unequivocally committed to service delivery improvement and management reform. Citizen members should be drawn from both the private and private non-profit sectors. Elected and appointed members should be officials with a demonstrated commitment to innovation and cost-effective delivery of public services. Congressional members should have a demonstrated interest in government performance and accountability, as well as a commitment to legislative reform and modernization.
A strong staff with extensive federal and/or state and local experience should be recruited and should-- from inception--work very closely with the Cabinetlevel Enterprise Board (discussed earlier) on issues of mutual interest. A reinvented ACIR could become the honest broker among and between competing and sometimes conflicting state and local interest, and competing or uncoordinated federal executive and legislative agencies. Its primary approach should be one of facilitation, supported by high caliber research and policy analysis as well as broad executive and legislative outreach.
In the next five years, a reinvented ACIR should design broader solutions to the grant proliferation problem and--in cooperation with strong existing bodies like the National Academy of Public Administration--accumulate evidence of best practices in the public sector and ensure their dissemination to policymakers and managers alike.
Finally, ACIR should be encouraged to establish task forces and provide opportunities for a wide range of federal, state, and local elected and appointed officials to offer policy advice, service delivery ideas, and participate directly in the activities of the Commission.
2. Develop appropriate benchmarks and performance measures to improve the understanding of public service delivery effectiveness. (2)
The President should direct the Cabinet-level Enterprise Board and/or request ACIR to provide leadership in developing a systematic process to define and measure national benchmarks. States and localities that have not already done so should be encouraged to initiate such efforts. Such benchmarks, performance, and outcome measures should be incorporated into federal budget practices as a part of the effective implementation of the Government Performance and Results Act of 1993, recently signed into law by the President.
Several actions can help move the nation in this direction. Development of national economic and social benchmarks can give all levels of government a clear framework for policy choice and priority setting. A focus on citizen-customers of federal programs can help government to rethink and redesign more effective intergovernmental program solutions. And better, more programmatic systems for budget planning and implementation can help to reinforce the outcome focus in intergovernmental collaboration.
3. Convene meetings which draw together leaders from federal, state, and local governments to review, refine, and advance the intergovernmental recommendations of the National Performance Review. (2)
This report envisions a transformation of federal and intergovernmental service delivery. To implement the concepts outlined here will require concerted bipartisan effort over a decade or more. This effort won't happen easily. And it won't happen at all without an understanding and commitment to the reforms at all levels of government.
In August 1993, the Vice President presented a preliminary version of these recommendations to state and local elected and appointed leadership attending the 1993 National Governors' Association Conference in Tulsa, Oklahoma. There was great interest in, and support for, the general direction of these recommendations. Participants suggested that the President convene a meeting as soon as possible to review these concepts, to develop specific legislative recommendations, and to determine the steps necessary to move forward quickly.
Meetings should include representation from Congress, the cabinet, other senior federal officials, and chief executives and legislative leaders from state, county, and local general and special purpose governments throughout the country.
Summary of Actions by Implementation Category
(2) President, Executive Office of the President, or Office of Management and Budget can do
FSL01.3 Establish a Cabinet-level Enterprise Board to oversee new initiatives in community empowerment.
FSL02.2 Issue a regulatory executive order addressing the problems of unfunded federal mandates and regulatory relief.
FSL03.1 Modify OMB Circular A-87 to provide a feefor -service option in lieu of cost reimbursement.
FSL04.1 Simplify grant compliance certifications by modifying OMB's requirements.
FSL05.1 Modify OMB Circular A-102 to require that the common grants management rules increase the dollar threshold for small purchases by local governments from $25,000 to $100,000.
FSL06.1 Reinvent the Advisory Commission on Intergovernmental Relations (ACIR) and charge it with responsibility for continuous improvement in federal, state, and local partnership and intergovernmental service delivery.
FSL06.2 Develop appropriate benchmarks and performance measures to improve the understanding of public service delivery effectiveness.
FSL06.3 Convene meetings which draw together leaders from federal, state and local government to review, refine, and advance the intergovernmental recommendations of the National Performance Review.
(3) Requires legislative action
FSL01.1 Create flexibility and encourage innovation by designing a bottom-up solution to the problem of grant proliferation and its accompanying red tape.
FSL01.2 Support proposals for Federal-State Flexibility Grants.
FSL02.1 Give cabinet secretaries and agency heads the flexibility to authorize selective relief from regulations or mandates.
March 11, 1993
Proposal for Federal-State Flexibility Grants Developed by Governors and State Legislatures [Endnote 1]
The White House
Washington, D.C. 20500
Dear Mr. President:
In response to your vision for restructuring government, the National Governors' Association and the National Conference of State Legislatures are pleased to submit a "Proposal for Federal-State Flexibility Grants." These flexibility grants, which we are asking you to include in your fiscal 1994 budget request to Congress, would provide states with more opportunities to innovate and to tailor responses to the unique needs of our citizens.
These grants could be a first step toward broader, more ambitious reforms. Flexibility grants would allow state legislators and governors to integrate funding from several different sources. They would encourage state governments to design their own strategies for moving forward on a range of domestic issues. They would relax stifling federal restrictions and would allow state leaders to focus once again on solving problems rather than on processing stacks of federal paperwork.
The enclosed proposal would combine approximately 55 existing programs, with a funding level of approximately $12.9 billion in fiscal 1993, into flexibility grants in six broad areas: education reform, workforce quality, air and land environmental management, water quality, defense conversion, and housing.
We believe that there are many other programs that could be combined in this way. In developing this proposal, we have attempted to be pragmatic. We have deliberately avoided possible flexibility grants that would cause questions concerning jurisdiction of congressional committees. We have also eliminated grants that involve local governments.
The flexibility grants would help reverse unfortunate
trends toward centralized
decisionmaking in our federal system, encumbering programs with unnecessary stipulations and regulations, and fragmented and inefficient spending for domestic programs. The nation's governors and state legislators look forward to working with you in refining this proposal and in moving it through Congress.
Please feel free to contact either one of us or Ray Scheppach or Bill Pound, our organizations' executive directors, if you have any questions.
Governor of Colorado
cc: Leon Panetta
Bob Rubin Alice Rivlin
Federal-State Flexibility Grants
The National Conference of State Legislatures and the National Governors Association have worked together over the past years to protect and improve the states' ability to innovate and to deliver services effectively and creatively. NCSL, for example, has promoted federal legislation that would limit unfunded federal mandates. NGA has campaigned for the Leahy-Pryor bill to ensure an expedited federal waiver process for states. Together, in 1990, the organizations developed comprehensive and detailed proposals for consolidating several existing federal aid programs to state governments.
A common theme pervades these and other projects. Governing in the United States works best when it is shared appropriately among federal, state, and local governments. We believe that states must have the flexibility to innovate and to respond to the unique and diverse needs of their residents. We believe that programs and services are most effective when it is clear which level of government is accountable for them.
The change currently taking place in Washington offers fresh opportunities to adopt remedies for problems affecting the state-federal partnership. Among the problems are:
--the proliferation of relatively small categorical grants;
--the burden of legislative and regulatory requirements attached to block grants;
--the rigidity of current federal grant programs and the concomitant restrictions that hamper states' ability to respond to the unique needs of their residents;
--federal statutes and regulations that prevent states from transferring funds among related programs;
--shrinking federal financial support for domestic discretionary programs; and
--the accelerating propensity of the federal government to mandate additional services and programs without adequate funding.
In combination and alone, these problems stifle innovation, confuse accountability, and degrade public services.
There are several ways to attack these problems. One, which has enjoyed varying degrees of bipartisan support over the past two decades, combines into a single grant two or more federal programs dealing with related problems.
There are several current examples: the child care block grant, the community development block grant, and the social services block grant. In his 1990 State of the Union address, President Bush proposed combining more programs into $12 to $15 billion worth of consolidated grants. In Mandate for Change, David Osborne has advocated consolidating "more than 400 categorical and block grants into broad Challenge Grants."
This proposal, developed jointly by the National Conference of State Legislatures and the National Governors' Association, offers several specific, albeit modest, suggestions for beginning this process of consolidation. In addition, it proposes changes to other existing federal programs, such as streamlined and coherent waiver processes, that also would improve the effectiveness and accountability of programs.
The proposal's six sections deal with education, workforce, environment, housing, defense conversion, and social services. The suggestions are consistent with criteria used in 1990 by NCSL and NGA to select programs for consolidation. In the interest of expediting consideration of these suggestions, we have also tried to respect, as much as possible, the jurisdictional authority of congressional subcommittees and committees.
Option 1: Education Reform Flexibility Grant
The longest standing and largest block grant to states and localities for elementary and secondary education is provided under Chapter Two of the Elementary and Secondary Education Act of 1965. This grant for improving elementary and secondary programs was expanded through both the Education Consolidation and Improvement Act of 1981 and the Elementary and Secondary Schools Improvement Amendments of 1988. Using the Chapter Two program as a point of departure, this proposal combines into a single grant the programs aimed at education reform that are coordinated by the states.
Create a state-level Education Reform Flexibility Grant by combining the following existing elementary/secondary education programs into a single grant to the states.
Elementary and Secondary Education
(Dollars in millions)
FY 93 Program Appropriations Chapter One-State Administered Grants.....$ 60.7 State Program Improvement Grants...... .....25.9 Chapter Two-State Block Grants......... ...435.4 Eisenhower Math and Science................246.0 Foreign Language Assistance............. ...10.9 Immigrant Education........................294.6 Drug Free Schools-State Grants.............498.5 Education for Homeless Youth................24.8 Follow-Through...............................8.4 State Agency Program: Education of Neglected and Delinquent Children................. ..35.4 Total...................................$1,640.6
States would be required to submit a plan outlining current and future systemic reform efforts along with a series of performance indicators that relate, where appropriate, to achieving the National Education Goals. Such indicators could include student drop-out rates, student absenteeism, and graduation rates. The state would report annually to the Secretary of Education on changes in the indicators.
Postsecondary Education. Provide states with the authority to target State Student Incentive Grants (SSIG) by assisting students enrolled in teacher education programs that are training high quality teachers, both pre-service and in-service, consistent with the state's systemic reform efforts. The SSIG program is the only direct funding source for states in the postsecondary education area. The remaining dollars are granted to students and institutions based on financial need. In fiscal 1993, $72.5 million was appropriated.
Because of its flexibility, the Chapter Two Block Grant has proven effective in supporting state efforts to improve education systems as part of the larger effort to achieve the nation's six education goals. The Education Reform Flexibility Grant would expand on the Chapter Two Block Grant to provide states with the incentive along with the needed flexibility to initiate or continue systemic reform.
Option 2: Incentive Grants for State-Level Education Reform
The longest standing and largest block grant to states and localities for elementary and secondary education is provided under Chapter Two of the Elementary and Secondary Education Act of 1965. This grant for improving elementary and secondary programs was expanded through both the Education Consolidation and Improvement Act of 1981 and the Elementary and Secondary Schools Improvement Amendments of 1988. Using the Chapter Two program as a point of departure, the proposal below combines programs that are coordinated by the states into a single grant.
Permit states to treat funds allocated under several federal categorical programs as a single supplementing flexibility grant for elementary and secondary education. The grant serves as an incentive for states to initiate or continue existing systemic reform efforts directed toward achieving the National Education Goals. To merge funds from two or more programs, states would be required to submit to the Secretary of Education a plan identifying current and future statewide initiatives facilitating state-level education reform and the achievement of the goals. The state plan would include assurances that services currently provided to discrete populations under the separate programs would remain consistent with the level of appropriation provided for those programs. Specific programs would include the following:
Elementary and Secondary Education (Dollars in millions) FY 93 Program Appropriations Chapter One-State Administered Grants......$ 60.7 State Program Improvement grants.............25.9 Chapter Two-State Block grants. ..........435.4 Eisenhower Math and Science..... ...........246.0 Foreign Language Assistance...................................10.9 Immigrant Education.........................294.6 Drug Free Schools-State Grants..............498.5 Education for Homeless Youth.................24.8 Follow-Through................................8.4 State Agency Program: Education of Neglected and Delinquent Children....... ............35.4 Total....................................$1,640.6
Postsecondary Education. Provide states with the authority to target State Student Incentive Grants (SSIG) by assisting students enrolled in teacher education programs that are training high quality teachers, both pre-service and in-service, consistent with the state's systemic reform efforts. The SSIG program is the only direct funding source for states in the postsecondary education area. The remaining dollars are granted to students and institutions based on financial need. In fiscal 1993, $72.5 million was appropriated.
Because of its flexibility, the Chapter Two Block Grant has proven effective in supporting state efforts to improve education systems as part of the larger effort to achieve the nation's six education goals. Incentive grants for state-level education would expand on the Chapter Two Block Grant to provide states with the incentive along with the needed flexibility to initiate or continue systemic reform efforts.
Option 3: General Waiver Authority
Currently, the Secretary of Education has minimal waiver authority to provide states with the regulatory relief needed to permit state-level systemic reform in education.
Elementary and Secondary Education.
Provide the Secretary of Education with general authority to waive regulations in selected programs. States would be required to submit a plan outlining current and future systemic reform efforts along with a request to waive specific regulations. The Secretary could waive regulations in the following program areas: Chapter Two, Jacob Javits Gifted and Talented Education Act, Drug Free Schools and Communities Act, Head-Start Transition Act, Follow Through Act, Dwight D. Eisenhower Math and Science Act, Carl Perkins Vocational and Applied Technology Act, Job Training Partnership Act, Emergency Immigrant Education Act, National School Lunch Act, and the Child Nutrition Act.
No limit would be placed on the number of states that could apply for waivers. A similar proposal was offered in the Neighborhood Schools Improvement Act.
Provide states with the authority to target State Student Incentive Grants by assisting students enrolled in teacher education programs that are training high quality teachers, both pre-service and in-service, consistent with the state's systemic reform effort. The SSIG program is the only direct funding source for states in the postsecondary education area. The remaining dollars are granted to students and institutions based on financial need. In fiscal 1993, $72.5 million was appropriated.
By providing such waiver authority, states can proceed with systemic reform efforts in the absence of federal barriers.
B. Improving Workforce Quality
Option 1: Workforce Improvement Flexibility Grant
Presently there are 125 different federal employment and training programs for adults and out-of-school youth administered by 14 different federal agencies. At a time when states and localities are attempting to offer comprehensive, customer-driven services, they are constrained by the differing eligibility, reporting, and program requirements of the myriad programs.
States with Human Resource Investment Councils could be permitted to access a Workforce Improvement Flexibility Grant, providing funds for a wide range of workforce development programs and sidestepping a multitude of conflicting program requirements. Governors in a number of states have established state Human Resource Investment Councils to coordinate adult and vocational education and job training programs. The state councils were authorized by federal law this fall, and a number of states are still in the process of creating them. States that have established Human Resource Investment Councils are, by definition, engaged in a great deal of coordination across existing systems. Instead of accessing job training and adult and vocational educational monies through existing program, if the Human Resource Investment Council so recommends, the state could take advantage of a Workforce Improvement Flexibility Grant. By giving sign-off to the Human Resource Investment Council, the key players will have bought into the flexibility grant.
States opting for the Workforce Improvement Flexibility Grant could access a single source of funds to provide adult and vocational education and job training and placement services as long as the state satisfies certain accountability measures.
In states where either there is no Human Resource Investment Council or where the council does not want to access the Workforce Improvement Flexibility Grant, monies would continue to flow through existing programs.
Programs included in the flexibility grant:
Adult Education (Dollars in millions) FY 93 Program Appropriations
Adult Education: State Administered
Programs..................................$ 254.6 Adult Education for the Homeless..............9.6 Workplace Literacy Partnerships.................................18.9 Literacy Programs for Prisoners...............4.9 Total.....................................$ 288.0
Vocational Education (Dollars in millions) FY 93 Program Appropriations
Vocational Education: Basic Grants
to States $972.8 Vocational Education: Consumer and
Homemaking Education. ....................34.7 Vocational Education: State Councils..........8.9 Bilingual Vocational: Training................2.9 Vocational Education: Community Based Organizations................................11.8 Tech Prep............... ..................104.2 Total..................... ..............$1,135.3
Training and Employment (Dollars in millions) FY 93 Program Appropriations Employment Service........................$ 810.9 Senior Community Service Employment...........5.9 Employment and Training Assistance for Dislocated Workers..........................567.0 Youth Employment and Training Program.....1,367.4 Veterans Employment Program.... ..............9.0 Adult Job Training Program......... 1,045.0 Defense Conversion Assistance..... .........150.0 Defense Diversification Program............ .75.0 Trade Adjustment Assistance.................211.0 Job Training for the Homeless... ............12.5 Total....................................$4,253.7
Total: Workforce Improvement Grant ....$5,389.02
A number of criteria could be adopted to ensure accountability, including the following:
--Funds could be made available to the state only upon submission of a state plan that demonstrates how funds will be used to foster workforce quality.
--States could be required to distribute to local communities the same proportion of funds that otherwise they would have been required to allocate.
--States could be required to serve individuals with special needs to the same degree that they would have otherwise, for example, homeless individuals, disabled individuals, migrant workers, and veterans.
--States could be required to file annual reports to provide sufficient data for the legislative oversight of the states' use of funds under the block grant.
Option 2: Workforce Quality Waivers
Presently, there are a multitude of definitions, reporting requirements, performance standards and the like that inhibit the provisions of a coordinated system of workforce training services.
States that have established Human Resource Investment Councils should be permitted to apply for waivers from law and regulations of, for example, the Job Training Partnership Act, the Carl Perkins Vocational and Applied Technology Education Act, the JOBS Program authorized in the Family Support Act, the National and Community Service Act, the Adult Education Act, the Vocational Rehabilitation Act, the Stewart McKinney Homeless Assistance Act (which authorizes a job training program for the homeless), the Wagner-Peyser Act (the Employment Service), and the Food Stamp Employment and Training Program authorized in the Food Stamp Act. States should be eligible to apply for waivers that would facilitate improved services, specifically waivers from regulation or law that prevent the application of consistent practices across programs.
The waiver authority should include protections relating to, for example, the distribution of funds and eligibility for services.
To facilitate an interdepartmental approach to waivers, a federal council should be established that includes, for example, the Secretaries of Labor, Education, HHS, and Agriculture.
Both the Workforce Improvement Flexibility Grant and the Workforce Quality Waivers will enable states to integrate more effectively a variety of state and federal programs designed to provide adults and youth with opportunities for education and training throughout their lifetimes.
C. Target High-Priority Environmental Needs Through Flexible Funding
The President's fiscal 1993 budget includes a total of more than $500 million for 15 separate EPA grants to states for the management of environmental programs. These grants are for the administration of specific programs for clear air, clear water, and hazardous waste. Generally these categorical programs require funds to be spent on specified activities, regardless of the particular conditions or relative importance of those activities in a given state. For example, funds are available for hazardous waste management and only that purpose, even though in a particular state environmental and public health protection may be better served by investing in air pollution control instead of hazardous waste management.
Two flexibility grants are proposed: air and land resources and water resources. In addition to waterrelated environmental management grants, the water flexibility grant includes the State Revolving Fund program for construction of sewage treatment plants.
FY 93 Program Appropriations Clean Air Program.... ....................$ 174.5 Public Water Systems ....................58.9 Underground Injection. ....................10.5 Special Studies... ...........................0.5 Hazardous Waste...... ...................93.3 Underground Storage Tanks.....................9.0 Pesticide Enforcement..... ................15.9 Pesticide Program......................................15.9 Radon Program..... ..........................8.1 Toxics Enforcement.... .....................5.1 Total.....................................$ 391.7
Water Quality Flexibility Grant (Dollars in millions) FY 93 Program Appropriations State Revolving Loan Fund...............$ 2,500.0 Clean Water Management... ..................81.7 Clean Lakes. ......................4.0 Nonpoint Source..............................50.0 Wetlands ....................................10.0 104 (b) Special Studies.. ..................16.5 Total...................................$ 2,662.2
Justification. Consolidation of these categorical grants into two block grants, with flexibility for states to allocate available funds among the programs within each block, would enable states to better prioritize their efforts and reflect the specific environmental conditions and needs in the state. The block grants also would eliminate separate applications and allow better targeting of state programs on high-priority environmental problems. In particular, resources could be used more easily to address multifaceted, related aspects of environmental problems in a specific geographic area by focusing attention on the area to be protected (e.g., an urban area or an estuary) rather than on its individual components (e.g., its air or its wetlands).
D. Increasing State Involvement in Defense Firm Conversion and Adjustment
The fiscal 1993 Defense Authorization Act and Defense Appropriations Act together created over 25 programs, committees, or task forces devoted to assisting workers, businesses, and communities cope with reductions in federal defense spending. States play a role in assisting each of these affected groups. However, this proposal is directed only toward programs aimed at using federal funds to assist businesses adversely affected by the defense downsizing.
Consolidate these newly created programs into a smaller number of more flexible programs. Specifically provide an opportunity for states to serve as partners in determining feasible projects, developing industry-university-government consortia and regional cooperative efforts, and locating affected firms. Existing state programs are accessible to small and medium-sized firms that could most effectively be assisted through these programs.
(Dollars in millions)
FY 93 Program Appropriations
Defense Advanced Research Projects Agency (DARPA) Dual-Use Critical Technology
Partnerships Program.........................$ 97.0 DARPA Commercial-Military Integration. ........48.5 Partnerships Advanced Manufacturing technology......... ...........................24.3
Partnerships DOD Manufacturing Technology. ...97.0
Dual-Use Technology and Industrial Base... ....97.0
Extension Regional Technology Alliances
Assistance Program (DOD funds to be
disbursed in consultation with the
Departments of Commerce and Energy) ...........97.0
Alternative: Administrative Action to Promote StateFederal Partnership
Administrative action could be taken to direct the Department of Defense and other affected agencies to draft regulations that permit states to work in partnership with the federal government in implementing these programs. This might include language permitting states to apply for waivers from categorical program requirements to utilize these funds in implementing comprehensive defense conversion programs. Another option could be language making states key players in the awarding of competitive grants, especially where state matching funds are involved.
Several states have already invested in programs to assist companies based in their states to convert from defense-related production to commercial production. Nearly all states have established public programs or public-private programs in some of these areas: promoting technology diffusion among companies; technology transfer from research laboratories into business applications; manufacturing extension services; and business modernization through adopting existing technologies and adopting modern business practices (just-in-time inventory, total quality management, etc.).
Businesses seeking assistance in defense conversion could easily contact state programs that would work with the federal government to establish priorities and develop successful program models and strategies. As partners, states could assist in implementing national defense conversion/ adjustment programs by matching business needs with available expertise, by developing partnerships and consortia to carry out conversion projects, or by evaluating competing proposals. States could become effective managers of these efforts. The federal government would save time and money and ensure greater access to assistance for small- and medium-sized businesses by developing an effective state-federal partnership.
E. Increasing Access to HOME Affordable Housing Program Funds
The HOME Investment Partnerships Program (HOME) was established by the National Affordable Housing Act of 1990. Designed as a federal, state, and local partnership to ensure more housing for low-income persons and families, HOME was intended as an incentive for states and localities to take a stronger role in providing affordable housing. Currently 40 percent of HOME funds flow to states. However, statutory and regulatory requirements make this an expensive program to administer, especially for a relatively new program.
By amending the HOME program, both through regulatory changes and statutory changes, the federal government could achieve its goal of more affordable housing, and states and localities could better use the funds to meet local needs. Simplifying the program, making the targeting consistent with other housing programs, reducing the paperwork requirements, and reestablishing states and localities as primary partners would increase state participation in the program. Onerous regulatory requirements for the comprehensive housing affordability strategies (CHAS), which must be filed each year for program eligibility, are only one example. Others include a controversial fund transfer and accounting scheme, a bias against new construction through stiffer matching requirements, and prohibitively expensive project oversight requirements. Partial improvements were achieved through legislation in 1992. However, action at this time could ensure that HOME funds are utilized across the country.
HOME Investment Partnerships (Dollars in millions) FY 93 Program Appropriations HOME Investment Partnerships Program.....$1,000.0
Alternative: Regulatory Relief within the HOME Program
By administrative action alone, the administration could improve the efficiency of the HOME program. Current CHAS regulations need to be simplified or waived for states to allow submission of state planning documents that address many of the same issues as the CHAS but in a much more efficient manner. HUD could work with states on sections of the plan that HUD found deficient and that related to the top priorities of both HUD and the state. Regulations for HOME also could be streamlined to encourage project development. By establishing simple and clear guidelines for project eligibility, states and local jurisdictions could readily determine the applicability of HOME funds to a given project. Efforts to attain consistency with other programs, such as the low-income housing tax credit or mortgage revenue bonds, would also help.
The HOME program was established because more affordable housing is universally recognized as an important component to solving the problem of homelessness. However, complicated program restrictions have deterred many jurisdictions from applying for funds. For example, existing HOME restrictions were aimed at guaranteeing that funds not be directed only toward new construction; that state match be made only of general revenues; that state funds be included in each and every project where HOME funds were directed; that states establish five-year plans to meet housing needs and publicly state where their resources would be directed, even though federal funding levels remained uncertain; that a percentage of the funds be utilized by community organizations whether or not they existed in all communities; that states would collect data on homeless individuals including whether drugs, alcohol, mental illness, or family abuse contributed to their homelessness; that states develop more extensive inventories of existing housing to determine not only the location of housing in need of rehabilitation, but whether such housing is occupied by elderly citizens, families with children, racial minorities, etc. Many of these are good public policy goals, but together they create an unmanageable and unrealistic burden. Easing these requirements and promoting a genuine partnership would ensure more affordable housing and a more cost-effective use of scarce public funds.
F. Consolidating Efforts Within the Motor Carrier Safety Program
Motor Carrier Safety Assistance Program funds are distributed by formula to states that have adopted compatible federal safety regulations. The state match is 20 percent. Under review this year, federal hazardous materials safety permit and registration programs have been slow to start. Flat fees are levied on shippers and carriers and are used to finance state emergency response grants. State and local governments also operate hazardous materials permit and registration programs. The scope of these programs is restricted by federal law which limits state and local governments to collecting fees that are "reasonable and used for transportation related purposes."
Consolidate programs related to motor carrier safety enforcement, inspection, permitting, and registration requirements. Eliminate duplicative reporting requirements and unify state oversight of all motor carrier safety.
FY 93 Program Appropriations Motor Carrier Safety Assistance Program.....$65.0
Federal Registration and Permit Program. ....11.3
States presently perform the preponderance of motor carrier safety inspection and enforcement. This includes efforts related to hazardous materials transportation as well. The elimination of the dual registration and permit programs to enable state to administer programs under federal uniform standards would allow states to consolidate all enforcement efforts under one widely implemented program structure, the Motor Carrier Safety Assistance Program.
The Programmatic, Financial, and Administrative Structure of the Flexibility Grant
Programmatic Structure. Flexibility grants are intended to increase the effectiveness of programs by allowing state government greater conformity in the design and delivery of services. To provide such conformity, flexibility grant authorizing legislation should:
--Include a clear statement of purpose, including goals for the flexibility grant and a description of the measures that will be used to judge the effectiveness of the use of flexibility grant funds. (Such legislation should leave to states the specification of the services and programs to be used to accomplish those purposes.)
--Clearly define any limits on financial eligibility for service under the flexibility grant. (Such legislation generally should not include categorical eligibility requirements, programmatic earmarks, or other nonfinancial eligibility criteria not directly related to the purpose of the flexibility grant.)
--Authorize limited transfer of funds among or between flexibility grants to provide the conformity to accommodate differences in state priorities. For example, 15 percent of flexibility grant X could be used for flexibility grant Y.
Financial Considerations. While flexibility grants increase state options and simplify administration, there is a continuing concern regarding the stability and responsiveness of future congressional appropriations. There is also a concern that uncertainty regarding federal audit standards may unnecessarily reduce flexibility and innovation. To address these concerns, flexibility grant legislation should:
--Make initial allocations of funds based on the application of current formula.
--Provide funding to allow for the upward adjustment in allocations based on the use of 1990 census data in the calculation of formula payments.
--Provide funding to allow for the upward adjustment in allocations based on increases for at-risk or targeted populations included in current formula.
--Guarantee at least level funding plus the rate of inflation for a period of five years. This could be done by enacting a permanent appropriation or an entitlement.
--Should federal or state audits determine that flexibility grant funds are being spent in a manner inconsistent with the purpose of the flexibility grant, allow the funds subject to an audit exception to remain available for acceptable purposes for a period of 12 months subsequent to the determination.
--If flexibility grants contain matching requirements or maintenance-of-effort provisions, provide that such requirements and provisions be waived during severe economic downturns. Otherwise the inability of states to provide matching funds or maintain existing program funding levels would result in a reduction in federal support.
Administrative Requirements. Flexibility grants are intended to improve government efficiency by reducing unnecessary and duplicative administrative expenses. To accomplish those ends, it is critical that new and existing flexibility grants address the following concerns:
--Funds should be made available to the states upon submission of a state plan that demonstrates that funds will be used in a manner consistent with the authorizing legislation.
--In general, federal mandates should be limited to those directly related to the flexibility grant itself. If other requirements are to be imposed, the states should be allowed to certify compliance without the submission of a detailed plan.
--States should be given broad authority to determine the state agency or agencies to be held responsible for the administration of flexibility grant programs.
--States should be authorized to use existing legislative or regulatory procedures and/or to establish alternative methods to ensure public input into the development of a state plan for the use of flexibility grant funds.
--States should be authorized to use existing state procedures for financial management and auditing of flexibility grant funds.
--States should have the authority to commingle flexibility grant funds with related programs as long as the overall purpose of the integrated program is consistent with the purpose of the flexibility grant.
--States should be authorized to establish and/or waive confidentiality requirements as necessary to facilitate the integration of programs.
--Flexibility grant funds may be used to fund their proportionate share of consolidated case management activities.
--Authorizing legislation shall not include limitations on administrative costs.
--Federal approval should not be required for the acquisition of data processing systems.
--States should be expected to file annual reports that will provide sufficient data for the legislative oversight of the states' use of funds under the flexibility grant. Such data should be relevant to the state plan, and should not be standardized except as necessary to provide information relative to the performance measures established by statute.
These suggested provisions are based on the assumption that existing state law and procedures are sufficient to ensure that funds are expended in a manner consistent with legal and political accountability. While it is reasonable for the federal government to require assurances that funds are being expended for the purposes set forth in federal legislation, there is no need for federal intervention in state administrative or legislative processes. Existing state programs already manage the distribution of state tax revenues far in excess of the value of any federal flexibility grants.
Following is the list of assurances every grantee must agree to comply with for funding received from the Federal Government. Additional assurances apply for all construction-related grants. The wording has been taken verbatim from a typical grant agreement.
Certain of these assurances may not be applicable to your project or program. If you have questions, please contact the awarding agency. Further, certain federal awarding agencies may require applicants to certify to additional assurances. If such is the case, you will be notified.
As the duly authorized representative of the applicant I certify that the applicant:
Accompanying Reports of the National Performance Review
Creating Quality Leadership and Management QUAL
Streamlining ManagementControl SMC
Transforming OrganizationalStructures ORG
Improving Customer Service ICS
Mission-Driven, Results-Oriented Budgeting BGT
Improving Financial Management FM
Reinventing Human Resource Management HRM
Reinventing Federal Procurement PROC
Reinventing Support Services SUP
Reengineering ThroughInformation Technology IT
Rethinking Program Design DES
Restructuring the Federal RoleStrengthening the Partnership in Intergovernmental Service Delivery FSL
Reinventing Environmental Management ENV
Improving Regulatory Systems REG
Agencies and Departments Abbr. Agency for International Development AID Department of Agriculture USDA Department of Commerce DOC Department of Defense DOD Department of Education ED Department of Energy DOE Environmental Protection Agency EPA Executive Office of the President EOP Federal Emergency Management Agency FEMA General Services Administration GSA Department of Health and Human Services HHS Department of Housing and Urban Development HUD Intelligence Community INTEL Department of the Interior DOI Department of Justice DOJ Department of Labor DOL National Aeronautics and Space Administration NASA National Science Foundation/Office of Science and Technology Policy NSF Office of Personnel Management OPM Small Business Administration SBA Department of State/ U.S. Information Agency DOS Department of Transportation DOT Department of the Treasury/ Resolution Trust Corporation TRE Department of Veterans Affairs DVA