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In 1992, Congress revised the formula that the federal government uses for distributing Block Grants to the states to provide substance abuse and mental health services. The formula calculates shares based on three formula components that are measured for each state: size of the population in need, cost of providing services, and each state's fiscal capacity. The purpose of this study was to inform Congress about the appropriateness of measures used in the current allocation formula and to identify factors that Congress might wish to take into account in the formula to attain greater equity in the distribution of funds. To this end, the study examines the concept of equity in the structure of the current formula to understand why Congress chose it, and reviews literature, methodologies, and data sources for measuring states' population need for services, cost of services, and fiscal capacity. Next, to evaluate the equity of the current formula, the study develops alternative measures of population need and cost of services based on recent national data, and compares formula allocations using these empirically based standards to the current formula's allocations.

This report is part of the RAND monograph report series. The monograph/report was a product of RAND from 1993 to 2003. RAND monograph/reports presented major research findings that addressed the challenges facing the public and private sectors. They included executive summaries, technical documentation, and synthesis pieces.

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