I received an eMail recently that caused me to ponder a subject I never had before: Is it more advantageous to have formula grants or competitive grants?

It's an appropriate question to consider, given the current political climate. The Bush administration has shown a preference for decentralizing the federal grants process by block-granting many federal education programs. As a result, several programs that used to award competitive grants directly to school districts through the U.S. Department of Education now leave it for the states to decide how to distribute funds. Knowing the stakes involved in these decisions can help school leaders choose where they stand on the issue, so they can lobby their state and federal legislators appropriately.

The eMail that led me to this subject, which came from a state Department of Education staff member, makes the case for the competitive grant process. However, upon further reflection, it does appear that formula grants have their place, too.

First, I should define "formula" grants and "competitive" grants so everyone understands exactly what I'm discussing. In the book Finding Funding by Ernest Brewer, Charles Achilles, and Jay Fuhriman, the authors define "formula" grants as "a noncompetitive grant that is typically awarded based on a formula, and it is sometimes called an entitlement." They go on to say the grantee agrees to conduct activities within a restricted range of options to achieve the specific purposes of an established program. In other words, the activities are of a continuing nature not confined to a specific project.

In contrast, a "competitive" grant is a request for funding for fixed or known periods of time, for specific projects. Usually, the applicant must specify what will be done within a specific time frame (also known as the methodology section of a proposal) and what costs will be incurred to carry out these activities (the project budget).

One disadvantage of the formula approach, as outlined in the eMail, is that it sometimes spreads the wealth too thinly to do much good. This complaint was commonly heard during the Bush administration's overhaul of federal ed-tech funding two years ago. The administration and House Republicans wanted at least 60 percent of funds to be distributed by states according to formula, but many ed-tech advocates feared this approach would result in an average of only $5,000 in technology funding per district, by some estimates--or barely enough to fund five new computers. So a compromise was struck requiring states to dole out half of the money by formula and the rest through competitive grants.

The next argument presented in the eMail was that not all of the intended recipients of formula funds in a given state may be in a position to use the money at the present time. This would result in funds being distributed to some districts that would not be maximized during the grant year.