Formula grants are US federal grants that use a specific formula to determine funding eligibility. State agencies distribute the funds based on guidelines issued by the government. The formula considers factors such as population density, poverty rate, and unemployment rate. Specific projects may receive a grant formula through political favors or lobbying. The process is competitive, and involvement is necessary for equitable distribution.
A formula grant is a type of United States federal grant that specifies a precise formula to be used to determine the amount of funding a recipient is eligible to receive. Grant formulas are distributed at the state level and are typically calculated based on factors such as the percentage of the population who are unemployed or below the poverty line; the infant mortality rate; and state population or population density. The elements of the formula are generally chosen to reflect certain characteristics associated with the purpose of the loan. Certain aspects of a formula grant are likely to reward some states more than others due to the many political factors involved in the lawmaking process.
US state agencies are the only entities authorized to receive formula grants. The agencies then distribute the funds from these grants according to certain guidelines issued by the United States government. The underlying rationale behind the formula’s grant distribution method is the belief that state agencies are usually more knowledgeable about the particular needs of a local community. In some cases these guidelines will allow the state agency some flexibility in distributing the funds. In certain situations, however, the guidelines are very specific regarding the distribution of funding and must be followed exactly.
The funding formula for a grant formula typically measures a state’s population density, poverty rate, and unemployment rate, along with the percentage of low-income households, senior citizens, and people with disabilities. Other grant formulas, such as wetland conservation grants, can only be issued by states that have some form of wetlands to preserve. Forest formula grants are typically issued based on a state’s total forest area. Specifically targeted states typically receive an extra portion of grant funds.
Many times, a specific project, such as urban renewal, will receive a grant formula after potential beneficiaries convince a member of Congress to put a special allocation for the project into a piece of legislation. These appropriations are often traded for other political favors between different members of Congress. Sometimes, a potential grant recipient hires a professional lobbyist in an attempt to secure a particularly valuable formula grant. This practice has made the grant award process highly competitive. Potential beneficiaries often need to be very involved in the allocation process in order to realize any kind of equity in the distribution of funds from grant formulas.
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