Block grants are not always the answer

This year I have been reading about the follies of the Great Society programs. Amity Shlaes’s book “Great Society” in particular points out how these programs may have started with good intentions, but led to disastrous results, from the point of view of the public. destroyed the lives of Pruitt-Igoe residents perverse incentives created by benefit programs.

In the mid-1990s, our nation transformed one of those benefit programs into a block grant called Temporary Assistance for Needy Families (TANF). We did it with the best of intentions. The hope was that states would know better how to solve their problems, such as poverty, and the block grant would provide flexibility so that each state could design solutions tailored to its needs. There was also the hope that if states felt responsible for a specific amount of money, they would ensure that the dollars were spent effectively.

As a conservative Republican, I sympathize with those goals. I generally believe that the government that governs closer to the people governs better. However, my fear is that our good intentions were not enough to create a good program. The drawbacks of block grants may outweigh their benefits in some circumstances.

An audit of my office this year revealed those drawbacks.

Last year, according to one tip, the Mississippi State Auditor’s Office launched a criminal investigation and audit of how Mississippi spends its TANF block grant. What we found was shocking: In a short period, $ 94 million in TANF funds were wasted or there was insufficient documentation to show that the money was legally spent. In February we arrested six people—Including the former head of the state agency that controlled TANF funds — for embezzlement and other crimes. It was the largest Mississippi public embezzlement case on our records.

The details are even more alarming. TANF paid for drug treatment at a luxury resort in Malibu for a professional wrestler who was also friends with the director of the welfare agency. He paid the speaking fees of other professional wrestlers and famous athletes, some of whom never gave their speeches, but were still paid. He paid for an investment in an experimental concussion treatment. Paid for religious concerts with no evidence that they benefited the needy, good cars for the heads of an influential local nonprofit (and paid a speeding ticket for the head of the nonprofit to boot), advertisements at college bowling games and football tickets, over-renting property owned by the same people who distribute the money, and much more.

All that bad spending happened, in part, because of some inherent weaknesses in block grants. The responsibility for these grants is too scattered. The federal government believes that it has placed most of the responsibility on states for spending money properly; state auditors might assume that the federal government is still doing the heavy lifting of controlling money; and the state agencies that spend the money assume that someone will stop them if they are not spending it properly. Neither party feels primarily responsible for retaining key documents or tracking whether the money pays off.

Then there is the question of who watches the money as it is spent. Ultimately, much of this monitoring responsibility falls on the same state agencies that make the expenditures. We found that if the agency wants to spend money illegally, all they have to do is stop monitoring and no one might notice or care.

Given these weaknesses, TANF and some other block grants need more, not less, federal oversight. More monitoring needs to be shifted to the federal government for states that have demonstrated that they cannot monitor themselves. If the federal government cannot afford to hire additional researchers to do this, stricter restrictions should be written for the programs. States must prove, with documents signed under penalty of perjury, how many people have been helped with their expenses. Otherwise, despite our best intentions, we will have established a structure prone to the very problem, waste, that we were trying to prevent when the block grants were created.

Shad White is the 42nd State Auditor for Mississippi.

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