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Categorical Grants | It’s Definition And Types

Categorical Grants

Categorical grants are a result of the United States federal system. Under this system, the federal government has power in some areas, such as military spending, while state and local governments have power in other areas, such as schooling, roads, and law enforcement.

But just because certain areas are the domain of local government doesn’t mean the federal government can’t influence them. Instead, the federal government uses money to convince states to comply with national targets. This is where categorical grants come into play.

Categorical Grants

Categorical grant is the type of grant that the federal government pays to a state government or some other semi-public purpose in order to use a specific purpose. This definition of categorical grants implies that the money can only be obtained if the state or local government complies with certain regulations.

Categorical Grants
Categorical Grants

Categorical grants are a result of the United States federal system. This congress system gives the federal government power in a number of areas, such as military spending.

In the meantime, state and local governments will have power over other areas such as schools, roads, and law enforcement.

While these particular areas are the domain of local governments, it does not mean that the federal government cannot influence them. Rather, the federal government uses the money to convince the federal states of compliance with the national targets. This is where the categorical grants come into play.

The Development of Categorical Grants: 1862-1975

Early Categorical Grants

The development of categorical federal aid can be traced back to the Morrill Act of 1862. Under this law, Congress granted each state portions of public property to be sold by them, with the proceeds being used to support colleges – the “Land Grant Colleges”.

These grants were by no means the first to be claimed by the state. There are previous examples including the pre-constitutional period and some previous scholarships had provided general support for education.

However, the Morrill Act was intended to specifically support states in training young people from the “agricultural and machine classes” in “agricultural and mechanical arts” 2 (engineers and for farmers who could produce food for the army), a requirement was also imposed : The colleges supported in this way must give military instruction.

States should invest the principal from land sales in approved securities, provide construction, and submit annual spending reports to Congress. ‘ This established basic elements in the pattern of categorical aid: “The necessary funds were provided in exchange for the acceptance of certain national minimum standards for a specific purpose.

Categorical Grants And The Federal System

In particular, the US Constitution grants certain powers to the federal government and reserves all other powers to individual states. This is to ensure that the federal government does not suppress the individual federal states.

This also restricts the federal government from being too powerful and inaccessible. However, Congress often introduces programs that it believes people would benefit from, even though it does not have the power to implement them at the national level.

For example, Congress may decide that the mandatory use of seat belts would significantly reduce injuries, deaths, and medical bills. However, it couldn’t just pass federal law making seat belts mandatory for everyone. In fact, it was decades ago, and all requirements for seat belt use lie with the states.

So Congress creates a program and then provides incentives for every state to adopt that program. The incentives are usually in the form of cash grants. This is a good example of categorical grants.

A categorical grant is a good example of how collaborative federalism is put into practice. Another example of categorical grants in action is when the federal government can offer money to the state to implement a seat belt program. However, there are certain requirements that the state must meet.

With this, the federal government is achieving its goal of making the roads safer for the majority of Americans. It does this without leaving the authority of the individual states.

Categorical grants are the most common types of grants that the federal government awards to both state and local governments. However, they are not the only form of federal funding. We’ll look at the types of federal grant funding.

Types of Federal Funding in The United States

The federal government offers financial support to states, non-state governments, and other parastatal organizations. The grants aim to support programs that benefit the general public. It is not intended for federal aid or loans to individuals.

These grants may also not be used to acquire property or contractual services that directly benefit the federal government. Federal authorities run more than 1,000 funding programs each year. Each of these must fall into one of the following categories:

Project Grant Funding

Project funding aims to subsidize certain specific services for a certain period of time. After this grant has been approved, the funding agency accepts applications from qualified organizations that apply for part of the total funding.

After the application period has expired, the agency will evaluate each individual application and then award grants to those who best meet the application requirements.

Categorical Grants
Categorical Grants

An example of project grant funding is the operation of the U.S. Department of Justice and the Justice and Mental Health Collaboration Program.

This program awards grants to states, local government agencies, and some tribal organizations.

The aim is to improve access to mental health services for criminals with mental illness.

The applicant agencies then provide a statement of how their projects will achieve the required objectives of the program. For example, around 20-30 of the applicants with the highest score receive scholarships.

Formula Grant Funding

Formula grants are used for ongoing programs that serve a specific group of people, such as children with disabilities or low-income students. There is no competitive selection process for this funding.

However, it is determined on the basis of general criteria such as population size or other census criteria. All applying agencies that meet the application requirements will therefore receive funding within the framework of the formula funding procedure.

An example of formula grant funding is the U.S. Department of Health and Human Services (“DHHS”) as part of the Nutrition Services Incentive Program. The program provides grants to promote the efficient delivery of nutritious meals to the elderly in a specific geographic area.

The formula used to determine the grant amount awarded to each applicant is based on the number of meals served to the elderly in the previous year compared to other states or regions. This is a system where the DHHS reimburses $ 0.50 per meal once each state reports their meal lists.

Block Grant Funding

The funding of block grants is also specified in a formula, but can be used to finance various projects. These grants are aimed at causes such as education, public health, or safety. It grants the recipient agencies a wide margin of discretion in the implementation and use of the funds. Recipients include community development, adult social services, and temporary assistance to families in need.

Categorical Grants Funding

Categorical grant definition simply means that it is a grant for government institutions and agencies and a very special purpose. In order to receive the categorical scholarships, applicants must meet certain requirements. Examples of categorical grant funding are Head Start Programs, Magnet School Programs, Forestry Assistance Programs, and Asbestos Removal Programs.

There are two ways that categorical scholarships are awarded.

1. Formula Grants

Here the congress decides how much it wants to spend on a project in total. After that, the money is shared with all states according to the formula. For example, food stamps are types of national programs that aim to provide people in poverty with access to good food. The national government spends just over $75 billion annually on grocery stamps

It is clear that some states are impoverished compared to others. Congress distributes the grants to these states according to the formula. As a result, some countries receive more funding than others due to their poverty rate.

2. Project Grants

Rather than distributing money according to a formula, they are competitive grants that local governments submit proposals to attract government funding. An example of project funding was the Ministry of Education’s Race to the Top. In this program, states competed for education money by making changes to their education systems.

These changes include adopting the Common Core standards, eliminating the number of charter schools, and improving the underperforming schools. Many states tried to win the money, but federal funds were only given to the selected states that won the competition.

Categorical Grants vs. Block Grants

With a careful examination of the block scholarships and the categorical scholarships, we can also find some similarities and differences. Categorical aids are federal grants given to state and local governments to encourage their collaboration in the implementation of specific purposes and programs.

While the block grants offer more flexibility, the categorical grants are more competitive and specific. The categorical grant has specific restrictions on the states that accept the grants, while the block grants have fewer restrictions.

In addition, the block grants are mostly only given to the local government. In the case of categorical grants, on the other hand, grants are awarded to the state and the municipality.

Federalism And The Politics Of Categorical Grants In Aid

National government has recently played an increasing role in encouraging and even forcing states to administer federal policies. Central to this developing relationship is the use of grants by the federal government to promote cooperation between states in implementing federal policy.

Increase in expenditure on categorical aids in the second half of the 20th century. This shows that the role of the national government in the federal balance of power is increasing.

Categorical Grants
Categorical Grants

Political actors in the national government set these categorical grant programs with varying degrees of flexibility and discretion of the state governments.

The Politics Of Categorical Grants In Aid

When the Republicans took over the presidency of Congress after the 1994 election, their “treaty with America” ​​aimed to “hand over” control of many federal programs to the states.

This is mainly done by replacing existing categorical scholarship programs with block funding programs. Two examples of this approach are social reform and crime policy.

  • Decentralization in Welfare Reform. The Republicans exchanged the state welfare program “Aid to Families with Dependent Children” (AFDC) with “Temporary Assistance for Needy Families” (TANF). This gives state governments block grants to reform welfare systems.
  • Decentralization of Crime Policy. With the Law to Take Back Our Roads, Republicans changed specific programs and grants for state and local governments. These programs marked the Clinton administration’s crime law with block grants to states. This way they can fight crime at their own discretion.


Here we can see that categorical aid is the main source of federal aid to local and state governments and other agencies. So they award the grants for a specific purpose and can only be used for this expressly specific purpose.

We have seen from the definition and example of categorical grants above that states never have to accept a categorical grant. But if they need it, they have to abide by the rules and regulations of this scholarship or it will be withdrawn. We’ve also seen block grants versus categorical grants, pointing out the fundamental differences.

  • Categorical Grant.