Everything Works Better At The State Level?

The next time you hear some politician (always a Republican) propose killing some federal program and instituting block grants to the states as a more efficient delivery process, remember this headline and the story that goes with it.

This particular story has to do with money that was part of a $25 billion national settlement negotiated with five banks over abuses in their mortgage and foreclosure procedures.  But there is nothing new about this; it happens all the time when the states receive federal money. 

Needy States Use Housing Aid Cash to Plug Budgets

 As part of the settlement, the banks agreed to pay the states $2.5 billion, money intended to help homeowners and mitigate the effects of the foreclosure surge. But critics complained that this was the only cash the banks were required to pay — the rest comes in the form of “credits” for reducing mortgage debt and other activities. Even that relatively small amount has proved too great a temptation for lawmakers. 

 Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes. 

 In Texas, $125 million went straight to the general fund. Missouri will use its $40 million to soften cuts to higher education. Indiana is spending more than half its allotment to pay energy bills for low-income families, while Virginia will use most of its $67 million to help revenue-starved local governments.

 When states misuse federal money, what are the options?  About all the federal government can do is cut off the money, which does nothing to help the people for whom it was intended in the first place, so the intent of the law (or settlement in this case) is still being thwarted.  Imagine the harm caused if Medicare became a block grant to the states, as some Republicans have proposed, and half the states decided to put half the money into their general fund.