What Is the New Fiscal Federalism?
Answered narrowly, the new fiscal federalism consists of federal legislation to restructure the funding mechanism of domestic programs in areas such as health care, welfare, and training. The changes would provide block grants to the states–specific federal appropriations giving the states funds to use at their discretion, within broad guidelines, in the areas of Aid to Families with Dependent Children (AFDC), the central and most controversial component of welfare; Medicaid; and job training. This would represent a dramatic change for AFDC and Medicaid, which today are entitlement programs in which federal law allows any person meeting low-income and other criteria to receive assistance. The change in job training would be more modest, since federal training efforts have for many years been composed of categorical grant programs. The block grants would contain new guidelines for states–in some cases giving them more freedom of action, in others imposing federal goals. Block grant fu
