Snyder’s Great Big Merger Myth

village_hall[1]This week’s discussion on Blogging for Michigan is all about mergers and consolidations of local units of government and school districts in Michigan. This is an important topic that will eventually impact every citizen in Michigan, mostly adversely. Know your facts.

Click here for audio. 

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:

First, 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. Call it the Burger King approach — a Whopper Jr. with cheese should be identical from store to store. Yet,  this doesn’t work with local government – each city, town and village has evolved in a unique way to adapt to the particular needs of the community it serves. From a 2010 report prepared for the Michigan Senate we find this 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.

The other mantra for this merger madness comes from Tea Party forces who want “smaller government”. This argument is simply moronic on its face — because it ignores that mergers and consolidations just create larger governmental bodies, not less government. Power becomes centralized and concentrated in the hands of fewer individuals (earning more money) ruling a larger portion of the electorate — and further removed from citizen input. Ironically, when local units of government in Northwest Michigan recently started to band together to consolidate for a single waste hauling contract, the first ones to squawk were Tea Party types complaining that it was “big government” taking away their local right to the decision, even though in that case the option saved them a lot of money. It’s amazing they make it through the day with that level of cognitive dissonance.

Back in 2011, at about the same time Snyder enacted the enhanced Emergency Manager law stripping targeted cities and schools of local control, he issued a “Special Message” to local units of government. The gist of the statement was innocous — encouraging intragovernmental agreements designed to create regional cooperation and goals — something many communities had already been doing without special urging. But, towards the end of Snyder’s message he said this:

We should permit open minds across the state to not only enter into collaborations, but to consolidate governmental units and activities as appropriate in their respective communities. The final decision regarding such consolidation should be left at the local level, but the consideration of such consolidation must not be prevented or discouraged by state government.

Sounds reasonable. At the time he was clear about the voluntary nature of the request. Yet, just two short years later we find laws that are forcing school districts to dissolve and be acquired by neighboring districts. The false rationale behind this state-mandated consolidation plan is found in the devastating results of a manufactured fiscal crisis perpetuated by the state through under-funding and unequally funding its schools. The craziest part of the scheme is that it is solely designed to punish the struggling school district through forced closure — because the “solution” does nothing to address the core fiscal crisis at all, in any way.

It is only a short matter of time before Michigan is faced with a legislative initiative to force closure of city halls across the state in a similar fashion.

So, how would a voluntary merger work?

The Citizens Research Council of Michigan recently conducted a study to assess the fiscal impact of a tentative 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 — not even a ballpark figure — of 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 potentially hundreds of contracts with vendors, special elections, and legal costs, including fending-off potential legal challenges from any of the affected parties.

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

The purpose of the grant program is to provide incentive-based grants to stimulate smaller, more efficient government and encourage mergers, consolidations, and cooperation between two or more qualified jurisdictions. The grants are to offset the costs associated with mergers, interlocal agreements, and cooperative efforts for cities, villages, townships, counties, school districts, and intermediate school districts that elect to combine government operations. The program is focused on stimulating projects between two or more qualified jurisdictions that are creating new mergers, consolidations, and/or cooperative efforts/collaborations of existing services.

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

(For more on the topic, Democracy Tree has written in the past about the merger mythology. Below is a recap of some of the pertinent research.)

MERGER FACT SHEET: Busting through the three merger myths — 1. Michigan has too many units of government, 2. Michigan’s local units of government cost too much, and 3. Mergers are the answer to these false problems.

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. 

Amy Kerr Hardin

 

 

 

 

 

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