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Dale Krane
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No one doubts the impact of globalization
on the organization and operation of governments everywhere
(Jun and Wright, 1996). The rapid changes in the international
environment -- economic, political, technological -- lead
many to concentrate their analytic focus on the broad contours
of globalization. The increasing interdependence and interconnectedness
cut across boundaries and render geography and place much
less relevant. Boundaryless problems, it is argued, can be
solved only by transcending the parochialism of local populations
and places. Some observers go so far as to suggest that these
sudden, qualitative shifts in the societal environment have
fundamentally changed the historic nature of public policy
and administration at the local, state, national, and global
levels, "...leaving little resemblance to the context
for self-governance that has existed during recent history"
(Luke, 1998).
One of the most important changes in the public sector caused
by globalization is a new wave of decentralization occurring
in governments worldwide. Unitary states are devolving authority
and resources to regional and local units, and more nations
are adopting various forms of federalism (Brown-John, 1988;
Elazar, 1987). In a very real sense, the current trend toward
decentralization recognizes a long standing principle of governance:
"the need for close contact between the individual citizen
and officialdom" (Smith, 1985). Every political system
establishes linkages between national and local government
because complete central control is extremely costly, both
administratively and politically. The ordinary but necessary
activities of government (e.g., maintenance of law and order,
provision of basic goods and services, the regulation of economic
activity) require geographically dispersed organizations which
possess the authority to resolve issues and address problems.
Decentralization rests on the delegation
of discretionary authority to public jurisdictions and organizations
at the local level. The level of local autonomy may be very
narrow, as is typical of administrative decentralization within
a central government's field network of administrative agencies,
or the level of autonomy may be nearly complete, as in municipalities
which have been granted substantial authority to make and
implement policy. An effective relationship between central
and local governments presumes first that local governments
do exist, and second that local governments possess some reasonable
degree of autonomy and discretion over the content and direction
of local public activity. The two trends of globalization
and decentralization not only complicate the usual tasks performed
by local government officials, these two trends also impose
new problems and responsibilities on local officials (Jun
and Wright, 1996). Consequently, the range of discretionary
authority and action available to local officials is a matter
of vital importance to any discussion of how the challenges
of governance in the twenty-first century will be resolved.
For all its significance, it is curious
that the level of knowledge about local government discretion
in the United States is rather modest. Russell Hanson (1998),
in the introduction to his recently published book on state-local
relations in the United States, declares
Relatively few scholars know much about
the constitutional, political, and fiscal
ties that bind states and localities, and even fewer have
much information about the
complex interactions between state and local governments engaged
in the delivery
of public goods and services. Research continues to suffer
from this blind spot on
state-local relations and, of course, so does the teaching
of subnational politics.
[emphasis added] (p. 3).
This "blind spot" in knowledge and understanding
derives in part from a legal conceptualization of local autonomy,
which ignores many of the realities of local government discretion
and the behavior of local officials. Second, little comparative
and systematic information exists beyond that provided by
a few studies of the constitutional and legal provisions for
local government action. Unfortunately, the information available
on local government autonomy in the Untied States is limited
to a narrow range of features, principally those related to
structure, function, finances, and personnel administration.
Similarly, a lack of consensus on just what constitutes local
government autonomy exists among analysts and officials. Future
challenges in governance will require solutions at the local
and regional levels, thus without more comprehensive information
about local government discretionary authority in all fifty
states, any understanding of local government capacity in
the United States will be stymied as will efforts to devise
governance strategies that rely on local governments to implement
them.
This essay reports a selection of preliminary findings from
a fifty state examination of local government autonomy and
discretion in the United States of America. The study draws
on a field network of researchers in each of the fifty states
who have agreed to develop a detailed description of local
government autonomy and home rule in their respective state.
Because each author has been asked follow a standard outline
of topics, the project will yield a uniform body of information
about the multiple features of local government discretion.
As a result, comparisons among the fifty states will be possible,
and comparisons with the status of local governments in other
nations will be facilitated.
The Development of Local Government Autonomy in the United
States: A Brief History
Local government autonomy, or "municipal
independence" as Tocqueville (1945) referred to it, has
long been a venerated principle in American government. In
Anglo-American history, the Carta Civibus Londonarum from
the year 1100 serves as the basic pattern for the grant of
rights and liberties to the residents of a municipality. English
borough charters gave communities the status of a corporation,
granted various commercial privileges, established the right
to select local officials, and often provided immunity from
certain royal taxes (Alderfer, 1956). Just as the English
colonists brought other aspects of late medieval English culture
with them, they also transported the forms and structures
of English local government to North America. Although the
early towns had limited charters, nevertheless the creation
of towns conferred several benefits on the property owners
and residents of the community. Towns had the authority to
offer various services such as roads and grain inspection,
regulate the value of land, develop commercial spaces, and
impose and enforce settlement laws. These 'settlement' laws
permitted town residents to select who could live in the community
and who could be excluded; the residents of these first localities
actually voted in town meetings on the admission of new inhabitants
(Burns, 1994). America's nearly 150 year colonial period served
to incubate local governments and local politics so that by
the time of independence "the custom and practice of
local self-governance was strong and pervasive" (ACIR,
1993b). It is important to note that the U.S. Constitution
is silent on the topic of local governments. Thus, the strength
of local governments in the new nation depended on the language
of the early state constitutions where local governments were
given corporate representation in the state legislature, which
had the power to erect and constitute municipal governments.
The next developmental phase crucial to
local government authority in the United States emerged out
of battles over the control of municipal governments and their
finances. By the 1840s local delegates to state legislatures
used their position to write statutes that permitted the local
legislative delegation to manipulate municipal activity. In
effect, "local privilege" or "special legislation"
created two often warring political masters: the city council
and the local legislative delegation. Unfortunately, this
practice led to widespread abuse, forms of which included
the deliberate creation and extinction of municipal corporations
as a tactic to avoid accumulated debt, patronage based awarding
of utility franchises (Burns, 1994: 49-50), and "the
rape of the cities by the so-called 'robber barons' of the
late nineteenth century"(Ostrom, Bish, & Ostrom,
1988). Ohio acted in 1851 to prohibit special legislation,
and many other states, but not all, followed this example.
A related set of problems occurred during
this same period because the legal status of the municipality
as a "public corporation" remained ill-defined.
Ambitious officials in many localities borrowed large amounts
of money to accelerate local economic growth. These borrowed
funds not only were used to build local infrastructure, often
the funds were spent to attract manufacturing plants or to
lure railroads. When these investments went bad, it was common
for some municipalities to repudiate their debt by terminating
the city charter, that is, literally voting the city out of
existence (Burns, 1994)! Local government investment behavior
prompted a debate among state judges as to the proper types
of municipal economic activities. An important question was
whether the use of municipal bonds for assistance to railroads
or manufacturers constituted a legitimate "public purpose,"
or whether such investment was an improper intervention into
private enterprise.
State and federal court decisions settled
this debate rather quickly. The precedent-setting court decision
was promulgated in the 1868 Iowa case of City of Clinton v.
Cedar Rapids and Missouri Railroad Company (24 Iowa 455 at
461). Judge John Dillon, who was the nation's premier authority
on municipal law, decreed that municipalities have only those
powers expressly granted to them by the state legislature,
and that any doubt about the existence of a municipal power
should be resolved in favor of the state government. Dillon,
disturbed by wasteful municipal investment practices, based
his ruling on the idea that strong state government control
of municipalities would minimize the mingling of public and
private functions which Dillon saw as detrimental (Sbragia,
1996). This decision, now commonly called "Dillon's Rule,"
was upheld by the US Supreme Court in 1903 and again in 1923,
and has remained as the dominant legal rule in state-local
relations in the United States ever since its promulgation.
Dillon's Rule simply means that the state legislature determines
the extent of authority which may be exercised by the officials
of any unit of local government. A state legislature may choose
to grant to local governments a minimal amount of discretionary
authority or a substantial amount of authority.
During this same period, others took a different
path to end the problems caused by "local privilege"
legislation and state legislative interference in municipal
operations. Rather than subjecting municipalities to state
legislative control, other reformers sought state constitutional
grants to municipalities that would permit cities to write
and amend their own charters. This reform strategy is known
as the "Home Rule" movement, and was originally
conceived as a means for ending the interference of the local
state legislative delegation in municipal affairs (Sbragia,
1996). Over time, it became associated with the larger idea
of broad grants of local government autonomy. "The essence
of home rule", Weeks and Hardy (1984) explain, "is
local authority to act without prior specific legislative
authorization, and limitation of state power to enact laws
regarding matters falling within the home-rule grant."
First adopted by constitutional amendment
in Missouri in 1875, other states such as California, Colorado,
and Iowa gave positive grants of authority to municipalities
via various forms of general enabling laws and the option
for home rule charters. Incorporated into the Progressive
reform movement at the opening of the twentieth century, home
rule spread to 13 states by 1915; but the movement stalled,
and only four more states established the home rule option
by 1936.
It is important to note, however, that Dillon's
Rule expressed only one side of what was a short-lived but
important debate over the appropriate extent of local government
authority in the USA. Judge Dillon based his dictum on the
view that the state legislature was the embodiment of popular
sovereignty and exercised supreme authority within state governments.
Other judges such as Thomas Cooley in Michigan challenged
Dillon's position by holding that the Tenth Amendment's reservation
of powers to the states and to the people, albeit ambiguous,
nevertheless reserved the right of local self-government to
the people. Courts in Indiana, Kentucky, Texas, and even Iowa
quickly supported "Cooley's Rule", which became
an important component of the Home Rule movement (Zimmerman,
1995). However, once the US Supreme Court upheld the state-dominant
position, that decision permitted state courts to narrow the
general grants of authority to municipalities, and this eventually
led to a slowdown in the home rule effort.
The Progressive Era's emphasis on efficiency,
economy, and professionalism became the vehicle for further
progress in the spread of the home rule idea. In the 1920s
"Good Government" associations such as the National
Municipal League disseminated model constitutional provisions
which included home rule concepts. This modest campaign continued
for the next three decades with incremental advances. The
American Municipal Association in 1952 hired Dean Jefferson
Fordham to conduct an analysis of state-local relations and
to make recommendations for a new approach. Fordham's Report
suggested a "devolution of powers" plan in which
a state legislature would make a grant of local discretionary
authority via the adoption of a municipal charter. The charter
under the Fordham plan would allow municipalities to supersede
special state laws and many general laws applicable to municipal
corporations. In its essence, the Fordham "devolution
of powers" plan proposed a reversal of Dillon's Rule.
Instead of the position that municipalities may only exercise
those powers explicitly granted to them, municipalities under
Fordham's plan could act unless explicitly prohibited by state
law. Twelve states adopted the plan, but, as with the home
rule movement, enthusiasm also waned for the "devolution
of powers" model (Zimmerman, 1995).
State statutes and court decisions, advisory
rulings by state attorneys general and by other state officers
(e.g., auditors) continue to define, refine, and redefine
the parameters of municipal authority in each state. From
a legal perspective what exists today has been summarized
by Mead (1997). First, "Dillon's Rule has been accepted
as the essential legal doctrine of state-local relations...".
Second, while some states such as North Carolina and Alaska
have granted local governments extensive authority and discretion,
"it remains the case that local powers are granted, not
inherent" [italics in original]. Third, "Home rule,
in one of its variants, is the practice in forty-five states..."
and they may be classified in two forms (1) imperium in imperio
and (2) legislative home rule. The imperium model, found in
nineteen states by Mead's count, recreates a form of "dual
federalism" in which certain powers are delegated to
municipal governments or designated as "matters of local
concern", and in either case are the exclusive preserve
of local government. Legislative home rule, used in 26 states
by Mead's count, rests on the idea that local governments
ought "to be able to exercise any power that the legislature
is constitutionally able to grant or is not prohibited by
either the U.S. or state constitution" (Mead, 1997).
Simply put, legislative home rule offers municipalities some
general powers and a list of specific powers which may change
over time. At least five different forms of municipal charters
have been used to express a given state's approach to local
self-government, but in general, the scope of local government
powers in a strictly legal sense falls into three categories:
(1) Non-Home Rule governments -- Dillon's Rule prevails, (2)
Home-Rule charter governments -- the original home rule idea
that a city should exercise those powers expressly granted
in its own locally adopted charter, and (3) Home-Rule grant
governments -- Fordham "devolution of powers" plan
(Weeks and Hardy, 1984).
This history of American local government autonomy reveals
several important problems associated with a strictly legal
conceptualization. First of all, while there appears to be
rather a straightforward three-part classification of the
status of municipal governments, in actuality, the amount
of discretionary authority available to them is often not
explicit, and varies significantly from state to state (Zimmerman,
1995). Second, a classification based solely on the availability
of the charter option completely misses other important dimensions
of local government authority (Liner, 1989; Gold, 1989). Third,
a legalistic approach to local autonomy does not clearly distinguish
between the activities of local governments as administrative
units and local governments as policy makers (Gargan, 1997).
And fourth, the traditional legal approach to home rule provides
little, if any basis for the development of systematic knowledge
about the discretionary authority of municipal government
and the consequences of variation in that authority.
Liner (1989) makes the basic point that
"complexity is given" when one examines state-local
systems of governance and the degree of local government autonomy
in the 50 American states. He suggests a two by two classification
scheme of public goods and services where one axis is the
presence or absence of local control and the other axis is
local versus state funding. The problem with Liner's classification
is that these decisions are seldom either-or; rather they
are typically decisions of degree as in the percentage of
local versus state funding for a given public service. Gold
(1989) follows a somewhat parallel path in his attempt to
analyze how state-local systems differ. Gold identifies four
major attributes along which states may vary: (1) local government
structures, (2) local autonomy, (3) fiscal centralization,
and (4) local revenue systems. Gold, in effect, argues for
the use of Joseph Zimmerman's well known "index of local
discretionary authority" in combination with other common
measures of fiscal centralization as the best means for gauging
the variation in state-local systems.
Zimmerman's Index (ACIR, 1981) rated the
discretionary authority of city and county governments along
four components -- structure, functions, finances, and personnel.
The index was derived in part from constitutional and statutory
statements which were rank ordered ordinally from 1 (greatest
freedom from state control) to 5 (smallest degree of freedom).
A separate score was assigned to each state on each of the
four dimensions. In addition, a mail questionnaire was sent
to knowledgeable persons in each state who were asked to rate
on the five point scale the degree of discretion available
to cities and counties for each of the four components.
The Zimmerman Index is the best available
measure of local government discretion in the United States,
but it is now nearly twenty years old. Because new forms of
local government discretionary authority have emerged and
existing ones expanded since 1981, these changes are not included
in the earlier study. Two examples of recent changes are (1)
enhanced authority to act in pursuit of economic and community
development, and (2) increased number of mechanisms by which
municipalities may collaborate with other local governments.
Another significant source of information
about local government discretion is the U.S. Advisory Commission
on Intergovernmental Relations (ACIR) report (1993a) on State
Laws Governing Local Government Structure and Administration.
Although it contains substantial information on seventy-five
separate items categorized into six groups, these items remain
classified within the scheme established by the 1981 Zimmerman
Index. Also published in 1993 is an ACIR (1993b) report entitled
Local Government Autonomy: Needs for State Constitutional,
Statutory, and Judicial Clarification. Michael Libonati, a
distinguished law professor, authored this analysis of the
history and legal status of local governments in the Untied
States. The report is a detailed legal history which depends
almost exclusively on the analysis of court cases and the
reading of state constitutions and statutes.
An over reliance on legal sources can lead researchers one
into committing what might be labeled as the "Lexis-Nexis"
fallacy. This fallacy refers to the assumption that the legal
language of state constitutions and statutes (now easily accessible
via the Internet through the Lexis-Nexis research service)
accurately represents actual practice. For example, the 1993a
ACIR study on local government structure indicates that in
the state of Nebraska cities have been granted home rule authority
by the state constitution. From a strict legal perspective,
this is correct since the Nebraska constitution permits any
city with a population of 5,000 to "...frame a charter
for its own government...", and cities of over 100,000
population may adopt their statutory charter as a home rule
charter. However, of the state's twenty-eight municipalities
of 5,000+ population, only three have ever adopted home rule,
and one of those three later voted to rescind its charter.
Further, the two cities with home rule charters possess what
at best may be called an illusory form of home rule because
(1) almost any new action by either city requires approval
of the state legislature, and (2) the state court rulings
have left no matter of strictly or purely local concern outside
the bounds of state action. Thus, on the basis of actual practice,
it is more accurate to state "home rule does not really
exist in Nebraska" (Winter, 1980). This one example,
which can be replicated in other states, alerts analysts to
the danger of equating legal definitions of home rule and
local discretionary authority with the behavior of state and
local officials.
None of the available compilations include
important powers such as "extraterritoriality",
planning and land use controls, the establishment of local
revenue rates, and contracting and purchasing authority. While
the range of new local government discretionary authority
has grown over the least three decades, so have new forms
of restrictions, especially in the area of local finances
and the conduct of public business. State governments, in
response to a national movement against property taxes, have
enacted various tax and expenditure limits as well as various
controls on local budgets and accounting practices. States
have even acted to address the issue of bankruptcy of local
governments. State legislatures have also responded to demands
for more transparency in government by passing laws establishing
"open meetings," "open records," and codes
of ethical conduct. Just as the national government has adopted
the use of unfunded mandates, so also have state governments
moved to impose unfunded mandates on their localities. All
of these newer forms of discretionary authority and newer
forms of restricted authority need to be identified and systematically
examined.
Another important aspect of local government
discretionary authority has been recently noted by Alberta
Sbragia (1996). As part of a study of urban governments as
borrowers and investors, Sbragia describes how local governments,
although limited by legislation and court rulings, have managed
to "circumvent" many of these institutional limits.
Many common place instruments of local government action such
as revenue bonds, tax exemptions, tax increment financing
as well new forms of local government such as public authorities
and special districts were created as part of the effort of
general purpose local governments to behave as entrepreneurs
in pursuit of the city's interests. The "politics of
circumvention", as Sbragia calls it, suggests that any
analysis of local government autonomy must include not only
positive grants of discretionary authority and the constraints
on local discretion, but it must also attempt to identify
and profile the creative ways local governments have circumvented
restrictions imposed by state governments. After all, local
government officials are not inert, passive individuals. Rather,
they act to pursue the interest of their locality by finding
where the current institutional arrangements permit room to
maneuver. Many years ago Deil Wright (1978) pointed out this
important feature of American intergovernmental relations.
What is striking about previous discussions of local government
autonomy is the absence of this important fact. Again, an
analysis solely based on what one can read in a state's constitution
or its codes of municipal law will be an incomplete, and even
misleading analysis because what the law states and what actually
happens are two very different phenomena.
In short, the available information about
the types and extent of discretionary authority possessed
by U.S. local governments is relatively incomplete. One important
reason for this incompleteness is the narrow legalistic definition
of local government autonomy that dominates the conceptualization
of this topic. Another factor contributing to the continuation
of a narrow definition of local government discretionary authority
is the curious lack of connection between standard political
science treatments of home rule and the treatment of local
administrative or governing capacity found in public administration
literature. If "governing capacity" is defined as
"the ability of a political system to do what is required
and expected of it" (Gargan, 1997: 518), then the close
connection between capacity and home rule is at once fundamental
and vital -- capacity will depend heavily on the authority
granted to the municipality. By remaining encased in a legal
framework, studies of local government discretion have not
been expanded to include the full array of discretionary instruments
of action available to local governments nor have they done
much to catalogue the specific constraints on municipal action.
Thus, a conceptualization of local government authority that
escapes the legal bounds imposed by Dillon's Rule and the
creation of a more complete, and thus more valid, data set
are necessary steps in advancing and testing contemporary
theories of urban governance in the U.S.A.
A network of scholars in all 50 U.S. states was recruited
by Dale Krane, Melvin Hill, and Platon Rigos to describe the
current status of home rule and local government discretionary
authority in each of their respective states. Initially, the
organizers invited several scholars interested in local government
to write an essay about home rule in their state, and to present
the essay at a series of conference panels arranged by the
three project leaders. The project organizers used these essays
to prepare a list of topics germane to home rule. A group
of scholars distinguished for their work in local government
and intergovernmental relations were invited to serve as an
advisory board for the project. Out of these dialogues, the
project organizers developed an outline that all state authors
were asked to follow. Appendix 1 provides a copy of the outline.
Certainly, any one examining this outline could make suggestions
for the addition or deletion of specific items. One principal
consideration that structured the outline was the desire to
add topics that had been overlooked in previous efforts to
study home rule; for example, economic development authority
and citizen control over local government officials.
Another important consideration that structured this outline
is the utility of collecting much of the same information
that had been gathered in the few previous studies of home
rule. Not only would this permit some analysis of change in
local government status, but it also would permit a comparison
of research that relied solely on legal documents, and research
that used documents, interviews, and expert observation. That
is, the information collected would allow the researchers
to answer the question: is a difference between the legal,
"paper" status of local government autonomy in a
given state and the actual behavior and practice of local
government officials?
As scholars around the country agreed to
participate, they were sent a copy of the standard outline.
The three project organizers also developed a survey instrument
related to the outline. This survey was sent to the state
authors. The survey was intended to aid the state authors
in their initial research; that is, completion of the survey
would yield a significant portion of the information that
needed to be gathered in order to write the chapter. Second,
the survey served as a vehicle for collecting certain items
-- some factual and some attitudinal -- about home rule in
each state.
Congressional Quarterly, Inc, has agreed
to publish the volume when it is completed. Discussions with
CQ led to a decision to publish the project as a reference
handbook that had four elements: (1) a standard introduction
to the topic, (2) the chapters on the fifty states, (3) a
comparative chapter with extensive use of tables, and (4)
a chapter to guide readers interested in further information
about the topic. The title of the completed volume will be
Home Rule In America: A Fifty State Handbook. Currently, chapters
on half the states are in finished form, while the others
are in various stages of review and revision. At this time,
the project is clearly "a work in progress." The
remaining sections of this essay offer a preliminary exploration
of the information collected to date.
Local government autonomy rests on three
pillars (1) local control of local government, (2) home rule,
that is, authority and capacity to make and implement public
policy, and (3) local finances (Briffault, 1996). Empirical
analyses of local autonomy and home rule in the United States,
as noted earlier in this essay, have collected information
primarily on the legal status, structural forms, personnel
administration, and fiscal limits of local governments. The
home rule study reported here is also in the process of collecting
information on these components of local autonomy, but the
current study is also gathering information on other important
dimensions of local discretionary authority [see Appendix
1]. This section provides a partial report on four different
elements of municipal government discretion. It should be
noted, as one reviews the information presented in the several
tables, that these tables are incomplete and represent only
the information available currently from the fifty state network
of home rule authors. Despite their incompleteness, the tables
reveal several interesting trends in local government autonomy,
and some of the tables offer information not collected by
previous studies of home rule in the United States.
In the United States fiscal autonomy of local governments
has not been deemed a necessary component of home rule. Because
of the dominance of Dillon's Rule, home rule concepts generally
do not apply to local finances. Legally, municipal taxation
and expenditure is closely controlled by state constitutions
and state statutes, and it is common to find a variety of
constraints, including accounting and reporting requirements,
debt limitations, and caps or lids on local tax rates (ACIR,
1993b). Out of 35 states (for which the home rule project
has a report on this item), 32 require an audit of municipal
finances. On the other hand, in only four of these states
does an entity of the state government (e.g., state auditor)
conduct the annual financial review. Similarly, of 36 states,
30 require municipal budgets to be balanced; six states do
not impose a balanced budget mandate on cities.
Although state governments hold legal supremacy in fiscal
affairs, the reality of actual practice is more complex and
varied. Constraints such as audits or balanced budget mandates
do not necessarily bind the hands of local government officials
so tightly that they cannot pursue local preferences in public
policy. For many analysts, therefore, it is the degree of
discretionary authority in financial matters that is the sine
qua non of local autonomy. B.C. Smith (1985) explains this
view:
it is a basic assumption in all systems
of decentralized government that the political
institutions created for the territorial subdivisions of the
state must, if they are to
have any political credibility, have some measure of independence
in the level of
revenue they raise and the choice of public goods on which
to spend it. Unlike the
field offices of national public organizations, area governments
are assumed to need
some power to decide at what rate the taxes assigned to them
by the constitution or
the national government, and some freedom to allocate their
spending among the
functions similarly devolved to them, according to their own
sense of priority.
(pp.99-100)
Put more simply, "local control would
be illusory if local governments were too poor to implement
the programs their people wish to adopt" (Briffault,
1996),. Fiscal decentralization, it is argued, insures a closer
correspondence of local preference and actions, strengthens
administrative capacity, and fosters political accountability
(Ter-Minassian, 1997).
Despite the legal supremacy over fiscal affairs held by state
governments, considerable variation exists among the American
states in terms of local discretionary authority to tax and
spend, and substantial change has occurred in the past 30
years (Gold, 1989). For example, the property tax as a proportion
of locally generated revenues declined from 69% in 1957 to
47% in 1987 (McCue, 1993). In the same time period, local
government reliance on consumption or sales taxes, user fees,
income taxes, and other sources of revenue expanded rapidly.
Table 1 displays the types of revenue permitted for use by
municipal governments in the 50 states. Excluding bonds and
investments, municipal governments utilize some combination
of 10 distinct types of revenues. Some of these revenue sources
have been part of the municipal financial toolbox for many
decades (e.g., business, commercial, and occupational fees
and licenses), while other sources are quite new (e.g., gambling).
The most widely used revenue source (35 out of 44) after property
taxes is the user fee, or charges for municipal services,
which might include items as diverse as utilities, parks and
recreation, libraries, and day care.
While the municipal finance literature has
paid much attention to the increased use of local sales taxes
and local income taxes, other revenue sources have become
just as widespread, or even more so. Examples include fees
on business, commerce, and occupations, motor vehicle taxes,
sale of city services to other jurisdictions, and fees imposed
on entertainment and tourism. As an example, where once the
costs of restaurant inspection was absorbed or subsidized
by the municipal budget, now the full cost of the inspection
is built into the annual license fee for restaurants. In some
communities, not only is there a sales tax on automobile rentals,
but an additional tourism surcharge (as high as 25% in some
localities) is added on top of the usual sales tax. If the
car is rented at a public airport, there may also be an extra
user fee that is levied to provide funds for the airport.
As of 1987 the property tax was the largest source of local
tax revenue in every state except Alabama and Louisiana. The
proportion of local revenues accounted for by the property
tax exceeded 90% in 19 states, but was less than 60% in only
seven states (Gold, 1989). However, this overwhelming dependence
on the property tax is changing swiftly. Table 2 presents
the percentage of municipal revenues by type of revenue source.
The state researchers in the home rule project were asked
to describe the distribution of municipal revenues by type
of revenue source for the typical locality in their respective
state. They encountered a number of difficulties with this
task. For example, not all states require uniform reporting
of city finances, and some do not gather any information.
In some states, the degree of local fiscal discretion varies
by population size or class of municipality. In some states,
fiscal data was available for only selected communities such
as the state capital or the larger cities in the state. These
shortcomings notwithstanding, Table 2 confirms the basic results
of McCue's (1993) recent research: "In general local
governments have become less reliant on property taxes as
a percentage of own source revenues."
Table 3, derived from Table 2, illustrates
this same finding by categorizing the states in terms of the
primary source of local revenue for municipalities. Compared
to 1987 when the property tax was the preeminent source of
municipal revenues in all but two states, Table 3 shows that
10 states now rely on some other revenue source. Similarly,
where property taxes accounted for more than 90% of municipal
revenues in 1987, of the 26 states for which property tax
data is reported on Table 3, only in three states do property
taxes constitute more than 51% of the local revenues, and
in 13 states, property taxes make up less than one-third of
local revenues. While incomplete, Table 3 also indicates that
a reliance on user fees as the principal source of municipal
revenues has emerged in some states; so much so that user
fees now surpass sales taxes as the primary source of city
revenues in those states.
Proscribed activity is the opposite side of the coin of discretionary
authority. Table 4 lists several possible financial actions
by municipal governments which state governments prohibit.
While the limits on bonded debt reflect in part the history
of corruption and abuse that occurred in the last century,
the range of the debt limits in place today provides a useful
gauge of the degree of freedom afforded municipalities in
their financial management. That is, the larger the bonded
debt permitted, the larger the degree of fiscal discretion
exercised by municipal officials. Equally interesting on Table
4 is how few states proscribe a particular type of action,
other than limits on the amount of money cities may borrow.
Another type of authority that states may
grant to municipalities is the ability of a city to collaborate
with other jurisdictions, general or single purpose. Table
5 lists the different mechanisms of interlocal cooperation
states make available to their municipalities. Discretion
in the realm of interlocal activity is a relatively newer
form of discretionary authority granted to cities and counties.
The statutes permitting cooperation go back anywhere from
twenty to forty years, often written under national government
encouragement. More recently, state governments have acted
to increase the variety of forms of interlocal cooperation,
and even mandate such cooperation. Predictions or recommendations
that interlocal cooperation will be an important strategy
for the solution of metropolitan or regional problems depend
directly on the willingness of state governments either to
permit municipalities to collaborate with other jurisdictions
or to create superior bodies that may exercise authority over
municipalities (Dodge and Stenberg, 1997). Also, normative
public choice arguments that alternative modes of service
delivery arrangements lead to higher levels of efficiency
and effectiveness depend heavily on the willingness of state
governments to permit interlocal cooperation as well as intersectoral
cooperation [e.g., public-private partnerships]. (for example,
see Ostrom, Bish, and Ostrom, 1988; Savas, 1987).
Since "a considerable portion of local government activity
falls into the category of provision of regulatory services"
(Sharp, 1990: 10), it is curious that previous studies of
local government discretion have paid scant attention to the
topic. While it is true that most municipalities exercise
regulatory powers over land use through planning and zoning,
it is not necessarily the case the authority has been granted
to municipalities; in some states, counties possess superior
authority. In other states, urban governments have planning
and zoning discretion, but not rural counties. In other instances,
both cities and counties have been granted land use controls,
but most counties in the state choose not to exercise the
authority granted. And as Table 6 shows, the authority to
plan and to zone is not always combined into a single grant
of authority over land use.
Municipal authority in planning, land use
control, and zoning within city boundaries is, of course,
widespread. But what is unique across the fifty states is
the exercise of extraterritorial jurisdiction. Extraterritoriality,
as this is sometimes called, comes in two forms (1) the authority
to own facilities and property located outside the city limits,
typically for purposes such as airports, landfills, and water
wells, and (2) the authority to regulate activity beyond the
city that may have an adverse effect on the city, such as
fireworks sales, pollution control, road location, subdivision
design, and topless dance clubs. Table 6 shows that this is
not a widely granted power, and where it is granted, the authority
is highly specific. Nevertheless, extraterritoriality is a
little known policy tool that offers municipalities leverage
over their external environment, even at some distance from
the city boundary.
Cities are founded for many diverse reasons, among these are
the ability to select one's neighbors, access to better and/or
more services, control over land use, and an increase in political
authority. Arguably one of the most frequent reasons for establishing
a new locality is the improvement of opportunities to engage
in commercial activity. Certainly in U.S. history the creation
of an attractive business climate, better access to vital
resources and transportation, the opportunity for lucrative
investment, and the ability to lower costs and risks have
all played a part in the establishment of thousands of municipalities.
Once established, cities do not hesitate
to pursue economic and community development, or as Peterson
(1981: 22) puts it: "Cities constantly seek to upgrade
their economic standing." Both municipal officials and
urban scholars consider economic growth to be one of the "..two
core functions of urban government" (Sharp, 1990: 1).
The ability of a municipality to engage in economic development
activity is a function of several factors, including resource
base, quality of leadership, organized plans and activities,
and available instruments of public action. Consequently,
it is surprising that previous studies of home rule pay no
attention to this significant aspect of local government activity.
Neither of the 1993 ACIR reports addresses local government
discretionary authority associated with economic and community
development beyond the traditional powers related to finances
and land use control. To fill this gap in the available information,
a section on economic development activities was included
in the Home Rule In America project.
Table 7 lists 43 different financial instruments
permitted municipal governments for specific use in economic
and community development activity. The most commonly allowed
fiscal instruments are the staples of local government finances
-- general obligation bonds, revenue bonds, and property tax
abatement or exemption. At the same time, one of the most
commonly permitted fiscal tools is a recent innovation --
tax increment financing. Second, some states appear to be
liberal in terms of the number of different instruments which
municipalities may use. Illinois stands out on Table 7 by
permitting its localities to use eleven different fiscal instruments.
Conversely, there are several examples of a particular fiscal
instrument being allowed only by a single state, such as Oklahoma's
public trusts, Michigan's bonds for public improvements that
benefit private property, or Georgia's freeport tax exemption.
This list also suggests that proximity (or regional groupings)
of states does not necessarily account for the pattern of
economic development discretion permitted municipalities.
Home Rule and Governance in the Twenty-First Century
The venerable concept of home rule does
not immediately come to the forefront of discussions of governance
and public management reform. These reform strategies go by
many names and emphasize what appear to be different concepts,
for example, 'customer-driven government,' 'devolution,' 'empowerment,'
'participatory management,' 'shared power,' 'value-added management,'
'deliberative democracy.' Yet, almost every proposed reform
strategy depends on effective and well-functioning local governments,
and presupposes local governments which possess extensive
autonomy and capacity. To the extent one accepts the evidence
that a powerful trend toward decentralization is moving the
locus of decision-making away from central governments, then
the capacity of local government units becomes critical to
successfully meeting the challenges to governance in the next
century.
In our increasingly interconnected and interdependent world,
would-be reformers must turn their attention to the ordinary
world of local governments. This is so because (1) citizen
satisfaction is one of the principal criteria on which the
success of the proposed reforms, whatever their name, will
be judged, and (2) local governments are the primary deliverers
of basic public goods and services. Among the elements necessary
to local government capacity is "sufficient institutional
and governmental authority to undertake existing and emerging
roles" (Cigler, 1997). Because local government capacity
is a vital linchpin in many reform proposals, local government
discretionary authority cannot be overlooked as an antiquated
feature of the public sector.
The study of home rule and local government
discretionary authority aids the reform process by establishing
a systematic body of knowledge that identifies the strengths
and weaknesses in local government capacity. Without an empirical
baseline of what the current degree of local autonomy happens
to be, it is difficult to offer sound prescriptions for change.
Likewise, without a consistent set of information gathered
periodically, it is nearly impossible to identify trends and
chart progress.
A broad base of information about home rule
also has practical applications. Any number of policy questions
turn on whether municipalities possess the discretion to act
on a particular issue and if they may act, how may they act.
For example, the effort to privatize has led to conflicts
over whether a city may sell its assets such as a public hospital,
and whether the city council may vote for the sale without
a vote of the citizenry. Questions such as these are precisely
within the domain of home rule. Cigler (1997) calls attention
to the increasing importance of home rule issues and the unfortunate
lack of information about the topic when she states "changes
in state-local relations have received less scrutiny, but
may be the key to devolution's success. The forces that generate
new demands on subnational (state and local) governments and
their wide-ranging renewal also merit more attention."
And finally, scholars and citizens alike
who are interested in the enhancement of democracy and community
cannot ignore the very instruments that make possible "municipal
independence." Calls for deliberative democracy, as fashionable
as they are, ultimately rest on the old fashioned concept
of home rule. A municipal government not under the control
of its local population renders civic discourse futile. One
can foster "community conversations", but without
the authority act, the discourse is in vain.
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