Government Structure & spending

1. Government Structure& spending Campbell, Rebecca and Geoffrey K. Turnball (2003). On Government Structure and Spending: The Effects of Management Form and Separation of Powers. Urban Studies, Vol. 40, No. 1, 23-24. Scott Stauffer ECON 539, Winter 2009

2. Government Structure & Spending • The Question is “…how government form affects spending.” • Professional versus Elected management • Municipal (city) and Regional (county) governance • Background: The Mixed Bag on Public Waste • The literature suggests “professional management leads to lower per capita municipal spending” (Broom 1966), while others suggest no spending differences exist as elected management typically oversees the professionals (Deno and Mahey 1987)

3. Government Structure & Spending • My MPP Connection: • Keeping State Policy Public: Accountability in Commission Governance (Coming Spring 2009!) • OTC Analysis, Corporate Observations, Call for Study • Public Leadership Models • What are we doing? • What are others doing? • What should we be doing? • Government Accountability • Time Management • Agenda Setting • Lack of Literature = Need for Further Research

4. Government Structure & Spending • Data • Two Sample Groups: Cities and Counties • Different By Design: • Cities = Mayor-Council or City Manager • Counties = Elected Executive, Council-Administrator, or County Commission • Two Sample Years: 1982 and 1992 • 1982 Data from Moody’s Municipal and Government Manual (discontinued by 1992) • 50 largest Metropolitan Statistical Areas (MSAs) • 642 municipalities • 205 counties • 1992 Data from Census of Government • 347 municipalities (less than 1982) • 356 counties

5. Government Structure & Spending Method: It’s All “Econ” To Me! • OLS and 2SLS regression analysis • The study used “…Hausman’s (1978) endogeneity test to choose between the exogenous aid (OLS) and endogenous aid (2SLS) versions of the spending equations. The reported estimates are the preferred OLS or 2SLS estimates as indicated by the Hausman test.” • A.K.A. “Test for Identifying Restrictions”: Hausman’s test evaluates the significance of one estimator versus another estimator. (Wikipedia and economics.about.com)

6. Government Structure & Spending Method: Two Empirical Models City Model: County Model: • Dependent Variable: Log of Per Capita City Spending on Core Functions (police, fire, highways) • Explanatory Variables: • INCOME (per household) • TAXSHARE*AID (share of taxes received by the city from state or federal governments) • TAXSHARE (share of tax base) • POPULATION (of the city) • DENSITY (population per square mile) • POVERTY (% of population below poverty line) • DEMOCRAT (% of pop. that voted D for pres.) • MANAGER • 1 = City Manager • 0 = Mayor-Council • MIDWEST • SOUTH • ATLANTIC (median figures per household) • Dependent Variable: Log of Per Capita County Expenditures on Core Functions (Police and Highways) • Explanatory Variables: • INCOME (same as city) • TAXSHARE*AID (same as city) • TAXSHARE (same as city) • POPULATION (same as city) • DENSITY (same as city) • POVERTY (same as city) • DEMOCRAT (same as city) • ADMINISTRATOR • 1 = Council-Administrator • 0 = Other • COMMISSION • 1 = Commission • 0 = Other • MIDWEST • SOUTH • ATLANTIC (median figures per household)

7. Government Structure & Spending Results: Two Empirical Models City Model: County Model: Table 3. Summary of municipal government form effects on spending 1982 1992 Pooled 0.0006 (0.0311) 2SLS -0.018 (0.041) 2SLS Atlantic 0.119 (0.074) OLS 0.097 (0.089) OLS Midwest 0.0006 (0.042) OLS -0.005 (0.055) OLS South -0.032 (0.069) OLS 0.275** (0.093) OLS West -0.035 (0.137) 2SLS 0.146 (0.105) 2SLS ** indicates significant at the 5 per cent level. Notes: The dependent variable is the log of per capita spending. White’s heteroscedastic consistent standard errors in parenthesis. Reported parameter estimates for MANAGER coefficient. Other independent variables are those listed in Table 2, excluding regional dummy variables. Model Statistics: R2 0.260 (1982) 0.224 (1992) F-Stat 21.464** 10.070** Table 6. Summary of county government form effects on spending 1982 1992 Pooled ADMINISTRATOR -0.365* (0.156) OLS -0.333* (0.160) OLS COMMISSION -0.573* (0.193) OLS -0.439* (0.180) OLS Atlantic ADMINISTRATOR -0.018 (0.349) 2SLS -0.183 (0.347) OLS COMMISSION -0.394 (0.459) 2SLS -0.279 (0.369) OLS Midwest ADMINISTRATOR -0.181 (0.180) OLS -0.058 (0.160) OLS COMMISSION -0.267 (0.212) OLS -0.156 (0.178) OLS South ADMINISTRATOR -0.592* (0.203) OLS -0.239 (0.224) 2SLS COMMISSION -0.791* (0.201) OLS -0.394 (0.243) 2SLS West ADMINISTRATOR 0.332 (0.198) OLS 0.116 (0.189) OLS COMMISSION 0.097 (0.183) OLS -0.072 (0.202) OLS * indicates significant at the 5 per cent level. Notes: The dependent variable is the log of per capita spending. White’s heteroskedastic consistent standard errors in parenthesis. Reported parameter estimates for MANAGER coefficient. Model Statistics: R2 0.276 (1982) 0.280 (1992) F-Stat 7.484** 11.113**

8. Government Structure & Spending Results: City Conclusions • City Government Form does not Affect Spending, Except… • Key Variable: MANAGER is insignificant in 1982 and 1992, indicating no relationship between City Form and Spending. • Except in 1992, Southern Cities had a significantly positive coefficient (0.275 (0.093) OLS), indicating greater spending under Council-Manager governments that Mayor-Council governments. • Differences in studies may depend on region and era, but “these results also show no persistent government form-spending pattern over all regions and time-periods.”

9. Government Structure & Spending Results: County Conclusions • Professional or Elected does not Matter, Except Separation of Powers Might… • Key Variables: ADMINISTRATOR and COMMISSION… “The coefficient estimates for these variables reveals that in both 1982 and 1992 council-administrator and commission governments spend less per capita” than Elected Executive governments. • Not clear which form causes this spending pattern, considering the mix of professional-elected managers, and legislative-executive separation • It’s not a Matter of Southern Professionalism, it appears to be about Separation • The significantly negative COMMISSION coefficients (-0.552 in 1982 and -0.440 in 1992) suggest that separated governments spend more than united government • F-Tests indicate the importance of regional differences that may not show in Nationally Sampling

10. Government Structure & Spending Results: Overall… • Management Form does not affect City or County Spending in Most Regions • Except in Southern Cities in 1992 with Mayor-Councils spent more than City Managers • Other aspects of city and county government are obscuring management form-spending? • Supports the Hypothesis: professional managers and elected administrators do not spend differently on the basis of being hired or elected • For Southern Counties, it might be about Separation of Powers • Separated Governments Spent More than Unified Governments in 1982 • County and City Governments are not Consistent with Each Other • Fundamental differences in the type of government and how they function in general • Other studies support this Conclusion (Turnbull and Mitias 1999)

11. Government Structure & Spending Public Policy Implications • The Myth of Big Spenders in Local Government: It’s Not True? • Except down South, local governments were just as apt to spend money – or not – regardless of professional management or popularly elected leadership • Obama’s Federal Stimulus Money will be Spent by All… or not? • Rebuke of Progressive Era Movement for Professional Government? • Hired by Elected Leaders, or Elected by Voters, Doesn’t seem to Matter • Periodic Demand for Local Changes… Not So Much? • No difference in Spending with different Government Forms • Next Time Portland Makes a Big Stink about it’s City Charter… • But, There May Be Other Concerns for Change: • Representation in the Government (Council Districts versus At-Large City) • City-County Government Consolidation (Mergers)