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Itís costly to be a small county
Capital Comments
By Larry DeBoer
Democracy works better when people are informed. Voters might demand that their governments deliver services at lower cost, if they knew what those costs were and how they compared across jurisdictions.

Thatís probably what the Indiana General Assembly was thinking in 2005. It asked the stateís Department of Local Government Finance (DLGF) to publish figures on the per person spending of each local government in Indiana. The report appeared in May. You can see it on the DLGF website - www.in.gov/dlgf/pubs - click on the 2005 expenditure report in the data analysis section.

Probably the legislators want citizens to compare the spending of their local jurisdictions to others, then ask questions about why some spend more and others spend less. Are high-spending jurisdictions inefficient? Are low-spending jurisdictions failing to provide needed public services? These are questions people could ask their local elected officials, with a few facts in hand.

Itís hard to know what to make of the reported numbers, though. DLGF says that there are inconsistencies in how different jurisdictions report their numbers. This makes comparison difficult. And only one spending number is reported for each government.

Operating costs and infrastructure costs are combined. A county, town or school corporation that just built a new facility will show high per-person spending, even if its day-to-day operating costs are low.

Researchers have found patterns in spending numbers like these. Wealthy jurisdictions tend to spend more per person.

They can afford it. Places that have more homeowner property tend to spend less, because homeowners pay more of each added dollar of property tax. Theyíre less likely to support higher spending when they foot more of the bill.

For county spending, neither of these patterns show up in the DLGF numbers. There doesnít seem to be any relationship between a countyís assessed value per person and its spending per person, nor between spending and the homeowner tax shares. Maybe the data inconsistencies and combined operating and capital costs hide the patterns.

One pattern does show up, though. Itís costly to be small. There are 11 counties in Indiana with less than 15,000 people. Nine of the 11 spend more per person than the typical county. The smallest counties averaged $1,570 in spending per person in 2005. The other counties averaged $1,090 per person.

This might be a symptom of ďeconomies of size.Ē The bigger you are, the cheaper it is to provide county services per person. Big counties can spread their costs over more people and more taxpayers. Small counties canít. This means that high per-person spending by small counties is not necessarily an indication of extravagance or waste. It may be a consequence of being small.

Or it may be that the numbers arenít right. Still, economies of size show up in a lot of research about local government. Theyíve been found for Indiana school corporations and Indiana library districts. They show up in county general fund appropriations. In each case, really small jurisdictions have higher costs per person.

Consolidation is one solution to this problem. Combined, two small library districts or school districts may have lower costs than they had individually.

But consolidation is often very unpopular, and itís not really an option for counties. County boundaries just donít change.

Thereís a new law on the books that offers another solution. It was passed as House Enrolled Act 1362 this past session, and itís going to be in Indiana Code 36-1.5 (but itís so new that itís not in the online Indiana Code yet). The code section is called ďgovernment modernization,Ē and among its purposes is to encourage local governments to use cooperative agreements to provide services.

Small counties could cooperate with other counties, other cities or towns, or other jurisdictions to deliver services. They might share equipment and employees or buy services from one another. Economies of size might be reached even though the county remains small.

Thereís even a section of the new law that allows voters to start a government reorganization effort themselves. To do that, though, theyíd need a lot more information. So, to DLGF: thanks for the spending data. We want more.

This farm news was published in the July 5, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.

7/5/2006