President Trump’s administration has focused on reducing red tape, aiming to streamline regulations. Another complex issue that requires attention involves the restrictions federal agencies impose on state grant recipients. These challenges are referred to as ‘green tape’ and burden states that accept federal grants.
The Office of Management and Budget (OMB) has introduced a proposal named ‘Regulation for Federal Financial Assistance.’ This initiative aims to release states from unauthorized requirements that federal agencies attach to grants. For instance, states will no longer need to apply disparate impact liability theory, which often deviates from Congressional intentions and diverts resources away from the intended beneficiaries.
My organization evaluates states annually using a ‘Federalism Scorecard,’ rating state policies that protect citizens from federal government overreach. A key metric is whether state legislatures actively decide on accepting federal grants and any accompanying conditions. Numerous states have been urged to adopt policies requiring legislative approval before engaging with federal grants, joining 17 states already implementing such standards.
Unreasonable requirements are often found attached to federal grants, typically through guidance or ‘notice of funding opportunity’ documents. For example, the Department of Housing and Urban Development’s 2023 homelessness services grant stipulated that applicants advance ‘climate resilience,’ not merely provide aid to the homeless.
Similarly, the Department of Education developed ‘supplemental priorities’ for grant programs encouraging ‘culturally informed discipline policies’ and ‘energy-efficient spaces.’ The Department of Agriculture’s 2023 Composting and Food Waste Reduction Cooperative Agreements prioritized climate change, equity, and environmental justice, rather than focusing solely on local food-waste reduction.
While some requirements seem individually reasonable, Congress likely did not intend these unrelated policy strings. Reducing conditions to align with Congress’s original purpose will lower project costs and expedite fund distribution to beneficiaries.
States receive substantial federal funding annually, but often incur additional expenses meeting federal requirements. The James Madison Institute estimates Florida uses 40 cents additional state revenue per federal grant dollar accepted.
The proposed OMB rule allowing grants to require reporting will ensure funding serves intended purposes, preventing misuse like fraud or discrimination. It refocuses grants on Congress’s objectives without compelling states to engage in illegal activities or political agendas.
Federal grants are crucial for supporting state programs relied on by citizens daily. By addressing the green tape, the Trump administration ensures grants effectively fulfill their purpose, rather than catering to bureaucratic priorities detached from public needs.
Jonathan Wolfson is a senior fellow at the State Policy Network’s Center for Practical Federalism.
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