Are the federal Alcohol and Drug Abuse (ADA) block grant funds substituting for or supplementing state and local government spending on substance abuse?Using panel data on state and local government substance abuse programs, this study explores the fiscal effects of the ADA block grant money and the increased enforcement (after 1989) of federal restrictions on state spending of ADA block grants. The findings here reveal that for the current period, the federal ADA grant has no statistically significant effect on state and local government substance abuse spending both before and after 1989, and the increased enforcement of federal restrictions on the ADA grants after 1989 does not change this result. An additional finding is that lagged ADA grants have had a large effect on substance abuse spending both before and after 1989—a feature of the program not considered in previous studies.

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