Reducing Green Tape in Federal Grants

President Trump’s administration is known for reducing red tape. Now, another challenge is being tackled: the strings attached to state grants by federal agencies. The White House Office of Management and Budget (OMB) is taking steps to eliminate a web of unnecessary requirements tied to federal grants, known as “green tape.”

In May, the OMB unveiled a proposal called Regulation for Federal Financial Assistance. This rule aims to free states from unlawful demands that have been imposed by federal agencies. For instance, states will no longer need to apply disparate impact liability theory, which often detracts from the intended purpose of grants authorized by Congress. These changes will help ensure funds benefit the citizens who need them most.

A significant aspect of this effort is the “Federalism Scorecard,” which evaluates state policies in protecting residents from federal overreach. One important criterion is whether state legislatures decide on accepting federal grants and attached conditions. Currently, 17 states require legislative approval before using federal grants, and more states are encouraged to adopt this practice.

Tracking federal grant requirements has revealed surprising stipulations. For example, the Department of Housing and Urban Development’s 2023 grant for homelessness services included a requirement to advance climate resilience. The Department of Education’s grant programs favored applicants that implemented policies unrelated to the main purpose. Similarly, the Department of Agriculture prioritized applicants that advanced climate change and environmental justice priorities over the primary goals.

While some requirements might seem reasonable individually, tying unrelated policy strings to grants was likely never intended by Congress. The new limitations help ensure grants serve Congress’s original objectives, reducing project costs and speeding up the distribution of funds.

States often spend additional tax revenue to meet grant requirements. For example, research indicates Florida spends an extra 40 cents for every federal grant dollar accepted. The OMB’s action to limit unnecessary conditions aims to minimize this burden.
This initiative ensures federal grants focus on their intended purposes without advancing political ideologies or illegal activities. Agencies can still mandate reporting to prevent misuse of funds, ensuring they reach the people in need.

Federal grants play a critical role in supporting state programs, helping citizens nationwide. By cutting green tape, the administration ensures grants serve the public effectively.

Jonathan Wolfson is a senior fellow at the State Policy Network’s Center for Practical Federalism.