Categorical grant
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During the development of the interstate highway system, congressional grants provided roughly 90% of the funding. These types of federal grants are called categorical grants because the national government determines the purposes, or categories, for which the money should be used. Categorical grants may be spent only for narrowly defined purposes and recipients often must match a portion of the federal funds. 33% of categorical grants are considered to be formula grants. See: Head Start, Urban Forestry Assistance, Asbestos School Hazards Abatement. About 90% of federal aid dollars are spent for categorical grants.
Categorical grants in the 1960s were meant to help the states perform their traditional functions.
[edit] Project grant
Project grants required state and local governments to submit proposals to federal agencies. Project grants encourage competition between groups that want the grant. There is also an emphasis on merit, as in the case of grants obtained by university professors.
[edit] Formula grant
Formula grants used a formula, composed of such elements as need and state and local capacities, to distribute funds.
