ABSTRACT
Categorical grants have been severely criticized in recent years because the incentives, restrictions, and regulations that characterize such intergovernmental transfers are thought to have altered the behavior of recipient governments in socially undesirable ways. It has been argued that the availability of federal aid for certain narrow, functional areas has led to the provision of these services at the expense of others that have much greater priority from the local perspective. Matching requirements allegedly have distorted spending patterns and lured some jurisdictions into fiscal overcommitment. Certain federal restrictions are thought to have fostered inefficiencies. For example, regulations limiting mass transit aid to capital projects has led to the premature purchase of new buses when more effective maintenance of the existing stock was more efficient.l Finally, many think that the methods used to allocate categorical grants
have encouraged governments to waste considerable sums just in obtaining federal aid; that is, they have invested in grantsmanship.
