Concern about fungibility of funds-of states not using money in the way intended-has led Congress in some instances to impose maintenance-of-effort requirements. Thus, in the 1996 welfare reform, to be eligible for a grant, states would have to continue to spend at least 75 percent of the amount that they had previously spent.
a. Show what this does to the budget constraint of the community.
b. How effective are such restrictions likely to be over time, as incomes grow?
c. How might a state attempt to get around this requirement by reclassifying expenditures?