Another Bellwether from California: local government consolidation

A recent story on PRI’s Marketplace radio show got me thinking about how the current economy is impacting local governments and what may come in the future: the cities of Glendale, Burbank and Pasadena are considering merging and consolidating all or parts of their government in order to save costs. Due to a reduction in taxes and state-level budget cuts, the cities are exploring whether a consolidation will help them do more with less.

It makes logical sense that less government translates into lower cost: larger entities have a better negotiating position in purchasing goods and services (gas, paper, various outsourced administrative services, etc). But there may be other reason why government consolidation may be beneficial. A 1980 study in Administrative Science Quarterly found that “the number of administrative units per capita is significantly and negatively related to quality of services.” In other words, fewer government entities lead to an improvement in the public’s perception of the quality of the government services being provided.

Whether or not Glendale, Burbank, and Pasadena go forward with their consolidation, the issue of government simplification may remain a hot topic at the local level for the foreseeable future. State and local government across the country are considering a variety of new measure to reduce expenses and raise revenue . Where else could simplifying the government help reduce costs? Two states where simplifying the complexity of government could result in not only an improvement in perception but actual improvements in how the government is managed are New Jersey and my home state of Rhode Island.

New Jersey has 21 counties, yet has 566 municipalities, and more than 600 school districts, some of which actually have no schools but Rhode Island, to its credit, has only four counties, but has 39 individual municipalities and 50 school districts, all of which do have at least one school (thank goodness for the previous efforts to consolidate the State’s 67 officially recognized villages into its 39 cities and towns).

Even though New Jersey is seven times as large, it is “relatively efficient” (if New Jersey were the size of Rhode Island, it would have 79 municipalities and 83 school districts). Then again, Rhode Island has one of the worst unemployment rates in the country at 12.5%, compared with New Jersey’s 9.8%. The striking numbers here are the number of governmental entities each state has. Each of these municipalities and school districts require its own administrative body, and each needs to generate revenue to pay for its operations (even if it doesn’t have a school).

Because one of the only ways local government can generate revenue is through property taxes, the situation has resulted in higher property taxes for these two states. As a result, New Jersey home owners pay the most in property taxes, Rhode Islanders pay the fifth most in property taxes. New Jersey home owners pay the highest amount of property tax as a percent of their income (and Gov. Christie may increase these taxes statewide), and Rhode Islanders pay the seventh highest amount of property tax as a percent of their income . In New Jersey, this has hurt the state as a whole when governors and state legislators, in an effort to gain votes, pass “property tax relief” bills, which passes along tax rebates to home owners, further inflating the state’s deficit. To balance the budget, Gov. Christie has encouraged local residents to reject their school board’s budget, allowing the state to reduce its obligations to the local school districts. In Rhode Island, the state assembly has already cut funding to local school districts .

While these efforts to blindly cut funding to schools may appear to be the “fiscally responsible” answer, without an accompanying plan to maintain and improve the strength of the educational system, it is not the social responsible solution. In a larger sense, both states’ efforts to manage public pension obligations present a larger and more long-term threat to their budgets (and both education reform and public pensions are an entirely more complicated bag of worms which will be addressed another day).

So, why can’t our public leaders find improvements and efficiencies through consolidation? The main threat to simplification and consolidation comes from the public leaders who run these micro-governments. All politics is local, and with these small municipalities, this rule is twice as true. Ballot efforts to consolidate governments do not have a history of success, due to the support by the residents of their local leaders. With their tiny fiefdoms to rule over, these public leaders are actually working against the public good when they refuse to take action to (or even discuss the possibility of) streamline government. Yes, it may eliminate their job, but it’s for the public good, which is why we hired them in the first place.