Consolidation snake oil called to task

March 21, 2011
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That One Kent Coalition has been privately plotting a “consolidation” of local governments for the last 18 months smells pretty fishy, and oddly coincidental with The Grand Rapids Press’ fishy claims that consolidating all our local school districts into county-wide school systems would save Michigan taxpayers $612 million a year. Modern researchers have focused more on the dis-economies of scale inherent in large organizations.

Elinor Ostrom, of Indiana and 2009 Nobel Laureate in Economics, showed that small police departments were more efficient than larger ones and explained the economies of small-scale evident in analyses of different-sized units of government. The Press should have read the research they commissioned and shared the caveats on page 3 with their readers: “Educational researchers and policy studies do not agree on the financial impact of consolidation. Some studies suggest that the current political emphasis on the consolidation of small or rural districts is misplaced, and estimate that the potential savings from consolidating small districts is about 10 times smaller than the potential savings from breaking up large districts. … There is little research-based evidence to prove that consolidation has solved the problems for which it has been intended — those of finance, staff reduction, facilities and curriculum improvement.”

The newspaper-funded “research” arrives at $612 million using formulas the lone-author admits haven’t proven to actually work in real life. Other researchers are more blunt. “With few exceptions, research describes the economic and educational advantages of large schools and districts as exaggerated, and in many studies there is evidence that consolidation worsened financial, academic, and social outcomes” reads a 2006 report to Texas policy-makers. Large government consolidation runs into similar debunking. “To this point, 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,” the Michigan Senate Fiscal Agency reported last summer.

University of Victoria Professor Robert L. Bish calls consolidation: “Local Government Amalgamations — Discredited Nineteenth-Century Ideals Alive in the Twenty-First.” Where this Bigger-is-Better Government theory gets traction is mystifying. But One Kent doesn’t emphasize savings. They claim consolidating into a single county-wide government would catapult Grand Rapids into the Big League and attract sports franchises, business HQ’s, development deals and major sports and entertainment events, spurring a new boom in economic development and job growth, as it supposedly did for Indianapolis and Louisville.

The obvious fallacy is that major enterprises look for potential customer populations in multi-county regions, not single government units with accounting gimmicks that triple their population overnight. It didn’t work in Louisville. Researchers compared economic data for 1999-03 (pre-consolidation) and 2003-7 (post-consolidation and pre-’08 meltdown) and found no evidence of any boost in business or economic development — trends declined instead. The “Indianapolis Miracle” ran out of gas a decade ago, after consuming almost $2 billion of taxpayer’s money. Despite a small dip in spending and work force right after consolidation, Louisville government spending (inflation-adjusted) surpassed its 1999 pre-consolidation level in 2007 by a million dollars.

There is no evidence for the wild cost-reduction claims before the 2008 economic meltdown. Louisville’s cutbacks pale compared to reductions that our local governments have been making without consolidation for many more years than Louisville. And in Indianapolis, UniGov tax rates skyrocketed compared to their unconsolidated neighbors, whose populations and businesses are booming now while UniGov languishes. By any objective measure, larger consolidations are risky gambles with serious downsides — loss of local governments and school systems — and little chance of compensating benefits. Historically, they weaken the influence of ordinary citizens and magnify the power and influence of already rich and powerful special interests, exactly like One Kent Coalition, which stands to reap windfalls from larger governments subsidizing their favored development projects and special interests. They’ve tapped out the city’s spending and borrowing capacity and are looking for a bigger pot of money — all of yours.

Peter Carlberg is a resident of Grand Rapids.

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