Choosing the Right Formula Initial Report (2001) / Chapter Skim
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1. Formula Allocation Processes: An Overview
1. Formula Allocation Processes: An Overview
Pages 1-11
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PART I Workshop Report This part of the report provides an account of the presentations and discussions at the workshop (see the agenda in Appendix A)
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Wray Smith, of the Harris Smith Institutes, opened the workshop by presenting "An Overview of Formulas for Allocation of Funds" (Smith and Parker, 20001. He noted that nearly $200 billion of federal funds are distributed annually to states and other units of government under formula allocation programs.
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Block grant programs are a subset of formula allocation programs in which the recipient jurisdiction has broad discretion for the application of funds received in support of such programs as community development or the prevention and treatment of substance abuse, which are specified in the enabling legislation. Matchinggrantprograms, such as Medicaid and certain transportation programs, require that the recipient state provide a matching percentage of funds from state sources.
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to the next. The inclusion of such special features sometimes requires use of relatively complicated iterative procedures to determine the allocation of a fixed total .
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Several considerations influence choices among alternative sources of input data for elements included in a formula: · The conceptual~'iit between currently available data and the formula elements, as defined in enabling legislation or administrative regulations. If the definitions of the elements or program goals lack specificity, evaluation of the fit may require subjective judgments.
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Decennial census data cover a larger proportion of the population and provide more geographic detail, but they lack timeliness and are subject to greater underreporting of some types of income. Regarding conceptual fit, he argued that the current official definition of poverty could be improved by adopting proposed revisions that include in-kind income as a resource and exclude taxes paid (see National Research Council, 19951.
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Program. Between 1972 and 1986, the GRS program allocated federal funds to approximately 39,000 local jurisdictions using a formula based on population and per capita income: · The General Revenue Sharing Data Stodgy by the Stanford Research Institute (19741.
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Office of Statistical Policy and Standards, 1978:11. The report included 5 case studies selected from the 10 largest programs using population and per capita income data as formula components.
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examined interactions between statistical issues and the technical and political aspects of formula design. Spencer recommended further statistical and policy research to explore a series of trade-offs: the use of simple versus more sophisticated formula components, the use of general-purpose data versus data produced primarily for use in allocation programs, the use of abrupt versus gradual eligibility thresholds, and updating versus not updating the statistical variables used in formulas.
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Finally, Smith and Parker described a report from the RAND Drug Policy Research Center, Review anal Evaluation of the Sul7stance Al7use anal Mental Health Services Block Grant Allocation Formula (Burnham et al., 19971. These grants were the subject of the third case study presented and discussed at the workshop (see Chapter 21.
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