Amy Kerr Hardin: Complexity is not the same as chaos

Today we have Amy Hardin back with us again, this time to talk about mergers & consolidations.

Play

Amy’s notes:

The 3 myths about local units of government in Michigan:

1. We have too many units
2. They are too costly
3. Mergers are the cure-all (primary myth to expand upon)

Here’s some introductory text I added to my notes:

Under the Snyder administration, the state has seen a push for an increased number of mergers. Not surprisingly, it comes with little or no data supporting the efficacy of the idea. The impetus behind the policy is two-fold:
1. The corporate mind-set of elected officials inclines them to adopt a business consolidation and standardization model for governance, with the notion that streamlining and simplifying systems will create efficiencies and cost savings. This argument ignores the fact that each unit of government has evolved in a unique way to adapt to the particular needs of the community it serves. From a report prepared for the Michigan Senate we find this in the pearl of wisdom:

In her 2009 Nobel speech, Elinor Ostrom stated, “Complexity is not the same as chaos” in reference to her own work regarding the relationship between local government structure and the efficiency and effectiveness of services.

2. The other main argument for this merger mania comes from Tea Party forces who want “smaller government”. This argument is moronic on its face — mergers and consolidations create larger governmental bodies, with power centralized and further removed from citizens.

MERGERS and CONSOLIDATONS

The Citizens Research Council of Michigan recently conducted a study to assess the fiscal impact of a merger between the cities of Saugatuck and Douglas. They found that combining the two municipalities would result in about $500,000 savings per year as a result of eliminating duplicate city managers, clerks and treasurers. Additionally, part-time zoning administrators and assessors would be combined into one full-time position. Other city personnel would be largely unaffected. However, the CRC study was unable to even estimate the one-time/short-term costs of the actual merger – buildings, equipment, software, procedural changes, training, rewriting ordinances, addresses, transferring city-owned property deeds, marketing, renegotiating contracts with vendors, special elections, and legal costs, including fending-off potential legal challenges from any of the affected parties.

Their advice to the cities: Apply for a whopping grant from the Michigan Department of Treasury Competitive Grant Assistance Program (CGAP) – in other words, pay for it out of state tax dollars.

Any citizen that has been involved with or observed the function of local units of government can attest that rewriting even a single ordinance can take months – a complete overhaul would be a monumental task bound to face grueling public scrutiny.

Eric Scorsone, an MSU Professor of Economics, is the foremost expert on the fiscal policies of local units of government. His 2010 study, titled Local Economic Consolidation: Assessing the Evidence for Cost Savings and Economic Improvement, should be a splash of icy cold water on the faces of the cheerleaders for consolidation and merger. The data simply does not support the wisdom of consolidation based on economic rationale, and additionally found, contrary to what many believe, Michigan is already one of the most efficiently run states at the local level.

Don’t believe it? Here’s the data:

Proponents of consolidation frequently claim that Michigan has too many units of government, but they actually have the least in the Great Lakes region: Michigan 2314, Illinois 6082, Ohio 3034, Wisconsin 2679, Pennsylvania 4356, Indiana 2939, Minnesota 3185.

Scorsone found no correlation between the number of units of government and per resident spending. In an examination of comparable states, with similar numbers of local bodies, he found Michigan to spend the least per resident at $4,609, while the others ranged from $4802 to $7,996. Wow!

Scorsone draws the following conclusions: “…the evidence seems to point to the fact that a policy of local government consolidation may not be effective in reducing or slowing the growth rate of governmental costs” and “Based on the available evidence, local government consolidation does not appear to boost the local economy.”

Not buying it?

Don’t take his word for it, try the Wall Street Journal, with their insightful piece last year about the consolidation movement in Michigan under Gov. Snyder. They found among the problems with merging local bodies of government and services are, not only strong voter-backlash, but no tangible evidence they produce the kind of savings that make it worthwhile.

Okay, still unconvinced?

How about a meta-analysis from the Indiana Policy Research Foundation titled The Effects of City-County Consolidation: A Review of Recent Academic Literature. (Reference notes alone, take-up over 1/3 of the pdf).

Here are a few of the report highlights:

“…police services do not often experience economies of scale as the level of production increases. Thus, creating larger departments through consolidation of police services will not likely lead to lower cost of provision.”
“As local governments with differing compensation structures are consolidated, salaries and benefits are often standardized at the higher level.” (As they should be, due to the increased competition for employees at that market tier — workforce supply and demand principles are not suspended out of mere wishful thinking.)

“The most pertinent conclusion from the literature is that government consolidation can lead to serious morale problems among government employees as distinct government units are merged.” (Anyone who’s experienced a private sector merger, acquisition or departmental consolidation can attest to the deleterious effects on morale within the corporate culture. These problems fester for years, even decades.)

Their conclusions were not supportive of consolidation — although they didn’t full-scale condemn it — they simply did not find compelling reasons to embark upon that course of action without closely examining a valid reason for it. They found that anticipated savings and perceived improvement of service were not generally borne-out in reality. The few times consolidation seemed to work were actually a result of better management practices, which were unrelated to the consolidation itself.

Mergers and consolidations are not a substitute for good management. Skilled and knowledgeable leaders look for ways to coordinate and cooperate with other departments and governmental bodies, forming voluntary, positive and truly useful alliances that save money and lives, improve service and maintain morale.

Guest:

  • Amy Kerr Hardin of Democracy Tree
There are no cover bands in the Rock and Roll Hall of Fame. Follow me on Twitter - @christinebarry
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  • nomore nelly

    It isn’t the fact that there are too many units but the fact that there are too many units not doing the jobs they are highly paid to do properly and within the laws of this state and country. For example, the Office of Children Ombudsman. Does a police officer ask you to provide a list of laws that the thieve violated before they will investigate a bank robbery? No, but that is what the Ombudsman’s office does. A complaint is a complaint and therefore is it not their job to know, see and apply the laws that were violated by the statements made in the complaint? If a complainant knows the laws then they can and would be better off filing a lawsuit rather than deal with individuals in this unit who aren’t concerned at a minimum level to do the job they are paid to do. This is just one example of Michigan’s “units” being non deserving of their existence and ultimately financial support. No one who has the authority or position to ensure these units are operating at the fullest capacity expected by their employers, the Michigan taxpayers, then they need to be done away with. Most employers have no problem getting rid of employees who don’t do their jobs merely because that is not profitable for them. So why are Michigan taxpayers forced to keep and forevermore financially support these individuals and units in a manner that far surpasses the average Michigan taxpayers lifetime income? Most taxpayers don’t even know that most of these “units” even exist and what they are suppose to do.