The role of funding policiesThe most powerful tool the federal government has in its relations with the states is money. A grant-in-aid is funding provided by the federal government to the states or municipalities. The earliest federal grants were land. Under the Morrill Act (1862), the states received large tracts of land for the specific purpose of establishing agricultural and mechanical colleges (still known as land-grant colleges). A categorical grant earmarks funds for a specific purpose. The two types of categorical grants are project and formula grants. A project grant is awarded on the basis of competitive applications; money from the National Institutes of Health or the National Endowment for the Humanities is awarded in this manner. While many project grants go to individuals, formula grants
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earliest federal grants, categorical grant earmarks