The Secret Benefits of Sharing Government Services

They may not show up in the bottom line.
February 2017
The Pendleton Round-Up in Oregon (Flickr/Donna Lasater)
By Justin Marlowe  |  Columnist
Justin Marlowe is a Research Professor at the University of Chicago’s Harris School of Public Policy. His research and teaching are focused on public finance, and he has published five books – including the first open-access textbook on public financial management – and more than 100 articles on public capital markets, infrastructure finance, financial disclosure, public financial technology, and public-private private partnerships. He is an admitted expert witness in federal and state courts, and has served on technical advisory bodies for the State of Washington, the California State Auditor, the Governmental Accounting Standards Board, the National Academy of Sciences, the Bill and Melinda Gates Foundation, and many other public, private, and non-profit organizations. Prior to academia he worked in local government in Michigan. He is a Certified Government Financial Manager and an elected Fellow of the National Academy of Public Administration, and he holds a Ph.D. in political science and public administration from the University of Wisconsin-Milwaukee.

Each September, Umatilla County, Ore., hosts the Pendleton Round-Up, a massive rodeo that draws 50,000 people, nearly doubling the county’s population. Cowboys and cowgirls from across the country bring their broncos to compete, while guests line up to watch them battle bulls and rope steers, among other things, over the three-day affair.

But bringing so many people together has a downside: Each year, there are always outbreaks of communicable diseases such as rotavirus and influenza. Umatilla County’s public health professionals have the unenviable task of containing these outbreaks. Fortunately, they don’t go it alone. The county has several cross-jurisdictional sharing arrangements with other counties throughout the region. An especially important one is with neighboring Morrow County. That agreement allows public health officials in one county fast access to patient case files from the other. When infections can spread quickly, time is of the essence, so the arrangement is a real asset.

This style of interlocal sharing is all the rage. By some estimates, including some of my own research, there are more than a quarter-million local service sharing arrangements across the country. Some are based on formal memoranda of understanding, while others are informal “handshake” agreements between local officials. You’ll find sharing across every local government service imaginable.

Interestingly, the majority of these arrangements have been formed since the Great Recession. That suggests local officials have come to lean on sharing to save money when budgets are tight. States have also gotten in on the action. New York offers financial incentives to local governments that can generate cost savings through interlocal cooperation. Other states have adopted a more aggressive approach: In Oregon, state funding for local public health agencies is mostly contingent  on interlocal sharing.

Politically speaking, sharing makes a lot of sense. It’s a wonderful counterpoint to consolidating local governments. Consolidation is politically perilous, and as I’ve written before, it rarely saves money. By sharing you get better services for less money and you get to feel good about cooperating with your neighbors. Who’s against that?

Unfortunately, the link between sharing and cost saving is unclear. So far researchers have completed about a dozen scientific studies on how sharing affects the costs of service delivery. Across the board, their findings show that expenditures in jurisdictions that share services are really no different from those in jurisdictions that don’t. Those findings complement dozens of case studies and anecdotes to the same effect. Several surveys of local officials also show that saving money is rarely their main motivation for sharing.

If sharing is not about driving down costs, then why has it become a go-to strategy since the Great Recession? It turns out sharing has a lot to do indirectly with saving money. According to those same studies, jurisdictions that share have greater capacity to deliver new services. That’s why it’s no surprise that sharing is most common in areas like disaster preparedness, local anti-terrorism efforts, cybercrime and programs to fight the opioid epidemic. These problems have all became headline issues since the Great Recession. Rather than create new, jurisdiction-specific programs, many localities have built these efforts as shared services. Without that sharing, these new essential services might not exist.

The same is true for preserving the scope and quality of existing services. There are dozens of examples across the country of one local government filling in a service delivery gap that emerged when a neighboring jurisdiction eliminated or scaled back that same program during the recession. Under these circumstances sharing won’t necessarily save money, especially if expanding a service requires spending money on new staff, facilities or equipment. But the cost savings might happen later, when a different jurisdiction agrees to step up and help its neighbors during the next recession.

Interlocal service sharing is complex, difficult work, and the return on investment is not always clear. It doesn’t save money in the traditional sense. But it does create flexibility and a bit more certainty in the increasingly uncertain world of local government finance.