Overload: Streamlining Governments

Too much government? Maybe. Too many governments? Definitely.
August 25, 2010 AT 3:00 AM
Bill Eggers
By William D. Eggers  |  Contributor
Executive director of Deloitte's Center for Government Insights
By John O'Leary  |  Contributor
Heads state and local government research for the Deloitte Center for Government Insights

Here’s what New York Attorney General (and gubernatorial candidate) Andrew Cuomo thinks about the hodge-podge of governmental entities in the Empire State:

Our system of local government is broken ... New York has more than 10,521 overlapping governments, including counties, towns, villages, school districts, special districts and public authorities. These entities impose layer upon layer of taxing structures -- with citizens receiving multiple tax bills annually -- resulting in the highest local property tax burden in the nation ... To hold government to account the people must have a government they can understand. But what they have today instead at the local level is a ramshackle mess. The current local government system is the product of sheer historical accumulation -- not logic, reason or common sense.

It’s too early to call it a movement, but state and local officials are beginning to ask hard questions about the multiplicity of government agencies. Huge administrative inefficiencies exist in the duplication and overlap among many county, city and township governments, as well as the many thousands of special districts that have mushroomed over the last three decades.

In some cases, the answer appears to be intergovernmental service sharing, such as the “Minneconsin” experience. But a more fundamental question is also being asked: Are these entities simply obsolete relics of a bygone era?

That is the argument made by Rich Pahls, a Nebraska state senator from Omaha, who has proposed merging many of his state’s 93 counties. The jurisdictions were designed for the days of the horse and buggy, he pointed out to the New York Times, not an era when “people will drive 100 miles to the grocery store.”

New Jersey, meanwhile, has some of the highest property taxes in the country, thanks in part to its 567 municipalities, a third of them with fewer than 5,000 residents, along with 611 school districts and 486 local authorities. Bergen County alone has 70 school districts and 76 superintendents. The state Legislature over the years has studied merging communities, but without much impact. In an effort to encourage consolidation, Republican Gov. Chris Christie steered a new property-tax cap of 2 percent through the Legislature this year, cutting it from the 4 percent increases that had been allowed previously.

New York State has more than 10,500 governmental entities that levy taxes and fees, and that depend on state largesse for any number of needs. This includes towns, villages and a multiplicity of water, sewer, lighting, school, 911 and other districts. Erie County, which is where Buffalo is located, has over 1,000 such local governing entities alone. This multiplication of local governments led to the passage earlier this year of legislation allowing residents to dissolve or consolidate a town, village or special district by referendum -- though if voters approve, the new law leaves the actual plans up to the jurisdiction in question. How effective it will prove remains to be seen: In the first vote under the new law, residents of Brockport, N.Y., rejected the idea of dissolving their village.

In Indiana, a bipartisan commission in 2007 proposed wholesale local government restructuring. “We find local government mired in an 1850s reality that’s cumbersome, redundant and complex,” the commissioners wrote. “The structure itself hinders our ability to provide equitable, efficient and effective services, and to respond quickly to a rapidly changing economy and world.” Under the Commission’s proposal, school districts with fewer than 2,000 students would be required to consolidate. The number of library districts would be shrunk from 239 to 92. Township governments -- which currently provide fire and EMS services as well as some assistance for the poor -- would be eliminated entirely. In the face of political resistance, the Legislature failed to adopt the proposals, but Republican Gov. Mitch Daniels says he’ll raise the issue again.

But while political leaders in the U.S. have been talking about local government rationalization, in Denmark, they’ve actually done it.

In 2007, Denmark shrunk the number of municipalities from 271 to 98. County government was completely eliminated. Fully 455,000 local government employees were involved in the restructuring; and 30,000 physically relocated to a new site. The government projects $274 million (1.6 billion DKK) in savings from the restructuring.

The implementation of this massive reform, which began in 2002, offers important lessons as other governments look to achieve big cost savings through rationalizing local government.

One important lesson: it will likely take years to derive actual, take-to-the-bank savings from rationalizing local government. Three years after the reforms took hold, and seven years after the effort was launched, Denmark is only now beginning to extract savings from the reforms.

Why has it taken so long? The political and administrative complexity of such a huge change is incredibly daunting. Thousands of people had to change jobs; IT systems were converted; new geographical boundaries were set; and hundreds of powerful mayors, city managers and other local officials lost their current jobs in the process.

Danish government officials believed that trying to realize large cost savings in the midst of such change would have caused deep opposition to the reforms -- opposition from the very people who would be relied upon to implement them, a risk that could jeopardize the initiative’s success, both politically and operationally.

Anyone hoping to rationalize the delivery of services from the state level on down must first understand where the opportunities lie to eliminate duplication and inefficiency. Then, you need to lay the groundwork for public acceptance of the change. Both of these goals can be served by gathering hard data on what every unit of government does, how much it spends and what it gets for its money. Only after these goals have been achieved can you make that information readily available to the public.

This is not an easy task. The collection of data alone is enormous. But data gives you the ability to shine a light on what is taking place under the status quo, making the tough task of driving change a little easier.

This column is adapted from our new study Red Ink Rising: The Road to Fiscal Sustainability.