Consolidation Is No Way to Streamline Government

April 14, 2008

Indiana Writers Group column for release Wednesday April 16 (782 words)

Editors: The author testified on consolidation before the Indiana Legislature and edited a special edition of the Indiana Policy Review on the topic. That edition can be accessed here (free registration required). A version of this article appeared in the March 23 Indianapolis Star.

by SAM STALEY, Ph.D.

Suppose Indiana government convened a commission on improving the state's economic competitiveness. And suppose one of their recommendations was to consolidate all of the state’s 659 machine shops into one big company, let's call it Indiana General Tool. The Indiana Chamber of Commerce, the Indiana Manufacturer’s Association and each of the 659 company owners would rightly protest, perhaps toppling the current administration and upending the General Assembly.

But doesn’t such consolidation make sense? After all, only 100 of these firms employ more than 20 people. Surely they could achieve efficiencies by combining their operations into one big organization. They could eliminate all those company presidents and treasurers and coordinate all the marketing and sales functions for their products under one central marketing office. A strategic planning division could decide what products should be produced and marketed, eliminating the duplication of small research-and-development programs scattered across the state.

That idea, for course, is absurd. Yet this is what the Indiana Commission on Local Government Reform proposed last fall when it issued its report, “Streamlining Local Government.” Townships would be eliminated. Police, fire protection and emergency medical services would be consolidated under one county government. School districts would be consolidated to ensure a minimum district-wide student population of two thousand.

Why? Efficiency, they say. “Our job was to recommend ways to improve the effectiveness and efficiency of local government, the commission members wrote. “We believe that our recommendations will do that and, as a result, lower the cost of local government and, by extension, property taxes.”

Too bad it’s not true. Making such a statement, in fact, shows a remarkable lack of familiarity with the real world of local government consolidation. Even the experts who research this area question the inevitability of improved efficiency.

For example, the Indiana Policy Review in the fall of 2005 surveyed researchers with direct knowledge of the effects of local government consolidation. Ninety percent of those responding believed that consolidation would not reduce taxes. Only about half with direct knowledge of Indianapolis believed UNIGOV had reduced overall costs while more than half believed it was harder for citizens to access government services after the consolidation.

The reasons for such results are complex and reflect the practical difficulties of implementing consolidation. In many cases, the consolidation process simply “negotiates up.” That is, employees in local governments who are paid less (townships) are brought up to the pay scales of the best-paid government workers. Moreover, the “transition costs” of consolidation — renegotiating collective-bargaining agreements, developing and adopting common standards, restructuring and realigning public services — are routinely underestimated by consolidation promoters. For example, the most rigorous statistical studies of police and fire department consolidations find little or no impact on service levels, productivity or efficiencies. (These studies are reviewed and summarized in a report to the Marion County Consolidation Study Commission available here.)

Notably, the Indiana Policy Review survey found consensus among the experts that consolidation could improve the technical efficiency of providing services and provide more uniform service delivery, two important goals of the Indiana Commission on Local Government Reform. Yet, even this begs a question: Is uniform service delivery desirable?

Surprisingly, probably not. Citizens don’t necessarily want uniform service delivery. That’s why they move to new neighborhoods and towns. Families in rural areas don’t necessarily want the same level of snow removal that cities in urban areas want. Families in some towns would rather not pay for the expensive back-door trash pickup desired in a neighboring town. Households in safe neighborhoods don’t necessarily want the same kind of street-level law enforcement needed in other towns or neighborhoods. In sum, consolidated county government with a mandate to provide uniform service delivery will be hard-pressed to accommodate the diverse interests and desires of Indiana citizens.

Instead of eliminating townships, for instance, state policymakers would be wiser to ask broader and more relevant questions. Which services, for example, should be devolved to the neighborhood and local level? How can state legislation enable the more efficient provision of service delivery at the local level?

Again, consolidating Indiana’s machine shops wouldn't make sense. A unified Indiana General Tool would squash the diversity and accountability that allows those smaller companies to identify key niches in their industry, thrive and remain globally competitive. Similarly, the sweeping changes recommended by the Indiana Commission on Local Government don’t recognize the inherent benefits of tailoring public-service levels to the diverse needs of Hoosiers.
Sam Staley, Ph.D., an adjunct scholar with the Indiana Policy Review Foundation, is a senior fellow with the Reason Foundation. Frequently called to testify before the Indiana Legislature, his experience in local government and economic development spans more than 25 years as a researcher, analyst and consultant. His academic work has appeared in leading professional publications, including the Journal of the American Planning Association, the Journal of Urban Development and Planning, Town Planning Review, Planning magazine and Urban Land. A recent book (co-edited with Randall G. Holcombe) is Smarter Growth: Market-Based Strategies for Land-Use Planning in the 21st Century.



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