Red tape reduction is a prominent feature of President Trump’s administration. Another set of constraints worth addressing are those imposed by federal agencies on state grant recipients. The White House Office of Management and Budget (OMB) is taking action to simplify these requirements.
In May, the OMB introduced a proposal known as Regulation for Federal Financial Assistance
. This rule aims to liberate states accepting federal grants from multiple unlawful requirements imposed by federal agencies. For instance, states will no longer need to comply with disparate impact liability theory, which often misaligns with the grants endorsed by Congress and redirects resources meant for citizens.
Every year, my organization evaluates states using a Federalism Scorecard to identify policies that shield citizens from federal overreach. One key measure is whether state legislatures decide to accept federal grants along with their conditions. We advocate for more states to join those 17 already requiring legislative approval before accepting federal grants.
This effort arises from monitoring the requirements of federal grants, often issued as guidance or within a notice of funding opportunity
. Together with the Center and participating states, we have discovered some unexpected conditions attached to grants.
Recent instances highlight the issue. The Department of Housing and Urban Development’s 2023 homelessness services grant required applicants to support climate resilience in addition to aiding the homeless. Similarly, the Department of Education’s grant programs added priorities for culturally informed discipline policies
and energy-efficient spaces
, diverting from the program’s initial goals. The Department of Agriculture prioritized applicants addressing climate change, equity, and environmental justice in its Composting and Food Waste Reduction Cooperative Agreements.
Although these requirements may not pose issues alone, Congress likely did not intend for unrelated policy strings. Nor would state legislators and governors anticipate such conditions with federal funding.
The new restrictions will align grant conditions with Congress’s intended objectives, potentially lowering project costs and accelerating fund distribution to the intended recipients. If only reporting or verification aligned with the grant’s original purposes were required, states may have fewer reservations, considering their receipt of substantial federal funds annually.
However, accepting federal dollars often compels states to use their own tax revenue for compliance, as estimated by the James Madison Institute: Florida spends an additional 40 cents for each federal grant dollar.
It’s promising that the OMB is moving to limit this practice. The proposal will still allow necessary reporting to ensure resources go to their intended purposes, reducing fraud and unlawful activities like political campaigning or discrimination.
Refocusing grants on Congress’s aims also prevents states from engaging in illegal actions or promoting political ideologies to obtain federal funds.
Federal grants are vital for state programs that citizens depend on. By eliminating green tape, the Trump administration ensures these grants fulfill their purpose, free from constraints that favor Washington bureaucrats instead of benefiting citizens.
Jonathan Wolfson is a senior fellow at the State Policy Network’s Center for Practical Federalism.