By the late 1960s, pressures were mounting for changes in the grant-in-aid system, particularly in grants management. Although various concepts and options had been explored from time to time, few actions had been taken. The changes that followed have emphasized efforts to reduce the programmatic influence of the national government, through both fiscal and administrative reform.
During the late 1960s, political reaction mounted to the strings attached to grant-in-aid funding. Increasingly, state and local elected officials sought financial assistance that would permit them greater discretion in spending decisions. The Nixon proposal for general revenue sharing (GRS) appeared to meet such demands.
GRS deemphasized concern for national policies and standards, defined state and local majorities as the key decision makers about program spending and included greater discretion for state and local elected officials. Despite attracting quite a following among state and local officials, GRS never lived up to its advance billing.
The principle behind revenue sharing was a simple one. A portion of tax revenues would be returned to states and to general-purpose local governments according to a prescribed formula defined by Congress and automatically followed each year. Revenue-sharing funds would be allocated with no strings attached, and recipient governments could use the money for almost any purpose. If GRS represented a departure from the problems with categorical aid, block grants were a more modest attempt to decategorize federal grants and devolve authority to states and localities.