The principal type of federal aid for states and localities is

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Categorical grants are the principal type of federal aid for states and localities. These grants offer funding for specific programs or projects, such as education, transportation or healthcare, and come with strict guidelines on how the money should be used. This allows the federal government to influence and direct state and local policies and programs, based on national priorities. Other types of federal aid, such as disaster loans or urban renewal grants, are more limited in scope and availability. Revenue sharing was a major federal aid program in the past, but it was phased out in the 1980s. Block grants, while still important, are less common than categorical grants and offer more flexibility to states and localities in how they use the funding.

The Principal Type of Federal Aid for States and Localities