Helping Hand or Centralizing Tool? The Politics of Conditional Grants in Australia, Canada, and the United States

Panel: State Restructuring: Theoretical and Empirical Perspectives Conditional grant programs are widely used in federal systems to address the tension between decentralized policy provision and macroeconomic constraints on constituent units’ ability to raise revenues and territorial equity. While enhancing their financial capacity, conditional grants are often seen as reducing constituent units’ policy autonomy. Against this backdrop, this article examines the real impact conditional grants have on the capacity and autonomy of a constituent unit. We analyze key milestones in the genesis and evolution of conditional grant programs in education and healthcare in Australia, Canada, and the United States. We find that the impact of conditional grants depends on constituent units’ size, fiscal capacity, and distinctiveness. Conditional grants are most beneficial to smaller and/or fiscally weaker constituent units but highly distinctive units suffer the most significant autonomy losses. If carefully designed, conditional grant programs thus have the potential to play a positive role in addressing spatial inequalities in multilevel systems.