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Block Grant In Education Case Study

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Block grant in education Why the block grant allocation formula? Across the board , there are three mechanisms to transfer federal allocations to sub-national levels of government. This includes, formula-based, ad hoc, and political negotiations. The formula-based budget transfer system has at least three advantages over discretionary system. To begin with, it bases the evaluation of each region’s entitlement largely on objective variables, thus avoiding excessive bargaining by the regional governments. Thus it increases fairness of the distribution outcome. Next, if properly designed it can eliminate the disincentive inherent in many discretionary systems that encourage low tax efforts and overspending of the sub-national governments. Above all, among other things, a formula based transfer system creates equity among the regional governments and provides an effective means to address regional disparity. Despite all these benefits the development and implementation of the formula is never an easy task. A careful study of the relevant international experience and an assessment of the country’s own situation are required if the system is to be both economically rational and politically feasible. …show more content…

Positively, it gives the central government sufficient flexibility to respond to changing and unexpected fiscal needs arising among regions. On the negative side, it can created uncertainty for regional governments since they do not know how their grant will be allocated or how much they will receive. In the same vein, the third approach, the political negotiations, is often transparent and the federal government retains full discretionary authority to establish the fiscal needs of sub-national

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