Block grants aren’t always the answer

This year I’ve 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 destroyed lives of Pruitt-Igoe residents to the perverse incentives created by entitlement programs.

In the mid-90s, our nation transformed one of those entitlement programs into a block grant called Temporary Assistance for Needy Families (TANF). We did so with the best of intentions. The hope was that states would know better how to fix their problems, like poverty, and the block grant would provide flexibility so each state could craft solutions suited to its needs. There was also a hope that, if states felt responsible for a specific pot of money, they would make sure the dollars were spent effectively.

As a conservative Republican, I’m sympathetic to those goals. Generally I believe government that governs closest to people governs best. My fear, though, is that our good intentions were not sufficient to create a good program. The drawbacks to block grants may outweigh their benefits in some circumstances.

An audit from my office this year put those drawbacks on full display.

Last year, based on a tip, the Mississippi Office of the State Auditor launched both a criminal investigation and an audit of how Mississippi spends its TANF block grant. What we found was shocking: over a short period, $94 million in TANF funds were either misspent or there was insufficient documentation to prove the money was spent legally. In February we arrested six individuals—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 in our records.

The specifics are even more alarming. TANF paid for drug treatment at a luxury resort in Malibu for a professional wrestler who also happened to be friends with the head of the welfare agency. It paid for speaking fees for other professional wrestlers and famous athletes, some of whom never gave their speeches but were still paid. It paid for an investment in an experimental treatment for concussions. It paid for religious concerts with no proof they benefitted the needy, nice cars for the heads of an influential local non-profit (and paid off a speeding ticket for the head of the non-profit to boot), advertisements at college bowl games and football tickets, excessive rent for property owned by the very people handing out the money, and much more.

All that misspending happened, in part, because of some inherent weaknesses in block grants. Responsibility for these grants is too dispersed. The federal government believes it has given the bulk of the responsibility to states to spend money properly; state auditors might assume the federal government is still doing the heavy lifting of policing the money; and state agencies spending the money assume someone will stop them if they aren’t spending it correctly. No party feels primarily responsible for retaining key documents or tracking whether the money generates good outcomes.

Then there’s the question of who watches the money while it’s being spent. Ultimately, much of this monitoring responsibility falls on the same state agencies doing the spending. We found that, if the agency wants to spend money illegally, all it has to do is stop the monitoring, and it is possible no one will notice or care.

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

Shad White is the 42nd State Auditor of Mississippi.