EXCESSIVE COST OF LOCAL GOVERNMENT

JUNE, 1932 ARIZONA HIGHWAYS 19 Excessive Cost of Local Government

The cost of government in this country, particularly that of local government, is causing considerable concern. We are told that the aggregate expenditure of federal, state and local government is approximately twelve or thirteen billion dollars yearly. Of this sum the federal government spends approximately one-third, state governments about thirteen percent, leaving considerably more than one-half as the cost of local government. Nothwithstanding the influence of the war on federal governmental expenditures these ratios have existed with slight variations, since 1890. It is manifest that inasmuch as the cost of local government constitutes the major portion of our aggregate tax bill, we must, if we hope for lower taxes or less rapid increases in taxes, analyze local government and see if its workings may not be simplified and made less expensive for the taxpayers.

The form of local county and town government as we know it in most of our states dates back to the Duke of York's laws, enacted about 1670. The design was to meet conditions as they existed at the time and was continued by American states after the Revolutionary War. It is astonishing how few changes have been made in the form since the formation of our nation. We may assume that at the time of its adoption it was suited to the conditions of that period. You will recall that no steamboats, railroads, telephones, telegraphs, motor vehicles or good roads were in existence. Means of transportation and communication were meager. The swiftest methods of travel or of communication were the saddle horse, the stagecoach and the canal.

Sometimes we refer to that age as the "horse and buggy age." Perhaps it would be more accurate to describe it as the "ox-cart age." We had no urban centers only a few overgrown villages. Our population was almost exclusively rural. In those days at least eight out of every ten workers obtained a living by tiling the soil. The people lived in small territorial groups and led local community lives. They subsisted almost entirely on the things which they produced or which were produced by others in their locality. A town form of government was the natural form. It suited the conditions of the time.

But conditions have changed. We have witnessed a most remarkablegrowth in population and an astonishing transformation in social and economic conditions. Factory production and a high degree of specialization even in our agriculture have kept step with improved methods of transportation and communication, with the result that community living on the old pattern has vanished. Instead of producing for our own families and neighbors to consume, we are putting our thought and labor on products that go to distant cities and states and even to foreign lands. We clothe ourselves in the fabrics of distant factories, we build our homes of materials transported perhaps thousands of miles and our food is collected from the four corners of our own continent and from all the other continents and the seas of all the world.

growth in population and an astonishing transformation in social and economic conditions. Factory production and a high degree of specialization even in our agriculture have kept step with improved methods of transportation and communication, with the result that community living on the old pattern has vanished. Instead of producing for our own families and neighbors to consume, we are putting our thought and labor on products that go to distant cities and states and even to foreign lands. We clothe ourselves in the fabrics of distant factories, we build our homes of materials transported perhaps thousands of miles and our food is collected from the four corners of our own continent and from all the other continents and the seas of all the world.

Our population, too, has become in part transient. We follow the call of industry, of ambition or of whim from community to community and from state to state. It is not only in the newer regions of America that the old resident may find himself in the minority.

Every village and every city and every community is made up of rapidly shifting groups whose members are units in a national economic and social scheme rather than fixed residents of any community. The untraveled person has become comparatively a rarity.

Things which originally were of local or community concern are now of much wider interest. This applies, as you will readily agree, to such things as roads, schools, public health, the care of the socially dependent and virtually every activity of local government. Yet we have continued to use the machine designed under radically different conditions as the major instrument through which to sell governmental service in this age of bewildering movement.

Let us inspect the machinery of local government as it exists today. In this country of ours we have, it is said, 500,-000 units of government. They range from the federal government down to the smallest school or special district. Take my own state as an instance. We have, first, sixty-two counties and sixty cities, but this is a mere beginning. We go on from these larger wheels of the machine to find 932 towns, and according to the last count, 525 villages, 9,600 school districts and 2,365 fire, water, lighting, sewer and sidewalk districts, a grand total of 13,544 separate, inde-pendent governmental units. Carrying the analysis a step further let me cite an example: a small, densely populated suburban county adjacent to New York City where we have three towns and two cities. Again, that is only a start. To these we must add forty villages, forty-four school districts and one hundred and fifty-six special districts in order to understand how complicated the local governmental problem in that county really is a total of 246 governmental units in one county.

pendent governmental units. Carrying the analysis a step further let me cite an example: a small, densely populated suburban county adjacent to New York City where we have three towns and two cities. Again, that is only a start. To these we must add forty villages, forty-four school districts and one hun-dred and fifty-six special districts in order to understand how complicated the local governmental problem in that county really is a total of 246 govern-mental units in one county.

The expenditures of local government have increased at an astonishing rate. In 1890, local government in the entire nation cost $487,000,000. In 1927, the last year for which complete figures are available, the government of lesser units within states cost $6,454,000,000. It increased from a per capita of $7.73 in 1890 to $54.41 in 1927. Just that you may see what has happened in a small unit such as a county, let me say that in the suburban county to which I have referred, all local taxes in 1900 amounted to $447,000, and in 1929, in round figures, $22,000,000. In that space of time the valuation of taxable property increased thirty-five times, but the taxes increased sixty-five times, while population multiplied only five and one-half times. In another case, that of a rural, agricultural county, local taxes amounted to $158,000 in 1900 and to $1,150,000 in 1929. In this case taxes were multiplied seven times, tax valuations slightly more than two times, while the population of the county actually decreased five per cent. In the suburban county per capita local taxes in 1900 were six dollars and in the rural county four dollars and thirty cents. But by 1929 per capita taxes were ninety dollars in the suburban county and fifty-two dollars in the rural community.

These figures demonstrate, first, the very rapid growth in the cost of rural government; second, that such growth was very much more rapid than the increase in either taxable wealth or pop-ulation, and, third, it presents sharply the question whether we are obtaining our money's worth through this method of buying governmental service.

These conditions have presented in my state and I think similar problems are present in every state the question of how to finance local government. In the main, local government must depend for its revenue upon a general property tax. To a very great extent that tax has degenerated into a tax on real estate only, and as local expenditures have increased the tax on real estate has mounted.

The increase in taxes on farm real estate indicates in a striking way the increases in taxation that have occurred and the added burden which this places upon agriculture. Here are some illus-trations from New York state.

On a selected group of good farms, taxes just doubled in the period from 1914 to 1923. During the same period the general price level increased only 27 per cent. In another case on three farms in an average agricultural county of the state where records are available for 100 years, the increases in taxes from 1825 to 1925 were as follows: Farm No. 1, from 2.48 to $101.44.

Farm No. 2, from $2.33 to $140.36.

Farm No. 3, from $2.38 to $115.20.

On the same group of farms mentioned above, it required three bushels of wheat on the average to pay the taxes on one farm in 1825. In 1925, it required 104 bushels of wheat. In other words, the tax burden per farm on the average of six farms increased in 100 years from three bushels of wheat to 104 bushels of wheat. On these same six farms it required at the going rates for labor six days of labor to pay for the taxes per farm in 1825, and 37 days of labor per farm in 1925.

Accompanying these increases in local rates has been an increasing demand for relief of the burden on real estate. A study was made in New York of the trend in the tax burden on real prop-erty, covering a period from 1915 to 1927. That study disclosed that in the wealthy, growing counties of the state the true burden on realty increased six-teen and one-half per cent in those twelve years, while in the rural, agri-cultural counties the increase in the burden was forty-three per cent. This established to our satisfaction that some-thing must be done to equalize the bur-den of taxation as between different counties and communities. Various remedies were suggested, which grouped themselves as follows:

In New York we have invoked all of these methods except that of reorganiz-ing or simplifying local government. That has been advocated by my dis-tinguished predecessor in office and by me. As yet nothing has been accom-plished in that direction. The legisla-ture, for various reasons, has almost wholly neglected or refused to act on any of the proposals either to simplify local government or to make a com-prehensive study of local government, looking toward improvement.

For instance, based upon the report of a commission of eminent health authori-ties, I urged the enactment of a law this year which would establish the county as the unit for health admin-istration, thereby reducing from more than one thousand to about one hun-dred the number of health administra-tive units. I believed the service would be improved, the public health better protected, more efficient use of the tax dollar obtained and discrimination against the rural population as compared with the urban population eliminated. That proposal was allowed to die in the legislature.

One of the remedies proposed was to abolish the direct state tax on real and personal property. That we ac-complished in New York during the first year of my first team. In that respect, we followed Virginia's course, established by your distinguished Governor Byrd. A second remedy that we have em-braced in New York is that of sharing with the localities certain taxes collected by the state.

During the last completed fiscal year the state returned to the various units of local government more than eighty-five million dollars as their share of taxes collected by the state. While I am on this point, let me say that this remedy is not without its dangers. I in-cline strongly to the view that it should be adopted only when some form of guaranty is exacted that the funds so distributed will be efficiently and eco-nomically used. Too frequently, I fear, do the local officials view revenue ob-tained in this way as "easy money" and spend it accordingly.

During the last completed fiscal year the state returned to the various units of local government more than eighty-five million dollars as their share of taxes collected by the state. While I am on this point, let me say that this remedy is not without its dangers. I incline strongly to the view that it should be adopted only when some form of guaranty is exacted that the funds so distributed will be efficiently and economically used. Too frequently, I fear, do the local officials view revenue obtained in this way as "easy money" and spend it accordingly.

This method of local tax relief is rather extensively used in New York. After my election in 1928, I appointed a commission known as the Agricultural Advisory commission. The purpose put before its distinguished members was to devise methods of assisting and promoting the interests of the rural population of the state, and of agriculture as an industry in the state and to see if and to what extent justice might be done by way of equalizing taxes as between the rural and the urban communities.

The first reform the commission recommended was that the state assume the entire cost of completing and maintaining the state highway system. Under the then existing law the counties were required to contribute thirty-five percent of the cost of such highways and to pay approximately $600,000 annually for their maintenance. It worked out this way: One of the wealthiest counties could pay its share of the cost of completing the state highway system by levying one tax of thirty-seven cents per thousand dollars of taxable valuation, while in a poor rural county a tax of forty-six dollars per thousand dollars would have to be levied.

The recommendation of the commission was adopted. Thereby the state relieved the counties of an aggregate expenditure of fifty-four million dollars for construction, and an annual charge of six hundred thousand dollars for maintenance.

The next recommendation of the commission was based on the town highway or "dirt road" situation.

To remedy this condition, a law was enacted which provided in substance that no town need have a tax rate higher than three dollars per thousand and that the state would give to a town as state aid the difference between the proceeds of a three-mill levy and a sum needed to create a fund equal to one hundred dollars for each mile of town highway. You will readily see that this tended greatly to relieve excessive local taxation and also to equalize the burden of supporting the town highway system.

The commission then turned to rural schools. They found that school tax rates varied from one dollar to more than twenty dollars per thousand. As in the case of highway taxes, the very high rates were found to obtain in the rural agricultural communities. The principle of equalization was invoked here with the result that rural schools in our state can now be supported adequately with a tax rate no higher than four dollars per thousand, the state contributing the difference between the proceeds of such a tax and a sum sufficient to maintain the schools.

I have mentioned those things that you may know of the effort we have made in New York to take from the sub-divisions of the state the burden of excessive local taxation, and I think you will agree with me that we have gone a long way. You will readily realize, however, that

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In our effort thus far we have merely shifted from local government to the state government expenditures for these purposes. It is true that in some instances the state is certainly doing these things better and more economically than the localities would have done them, and in that way, genuine economy has resulted. It is also true that through these measures we have gone far toward equalizing the tax load in New York state; but the fact remains that we are still supporting a complicated machine of local government which seems to me and to many others unreasonably expensive, wasteful and inefficient. In our effort thus far we have succeeded in reducing somewhat in the aggregate the cost of this elaborate machine.

Time for Analysis

Is it not time that we should analyze this form of local government and see how far it is suited to the conditions of today? Think of it in this light if you will: No citizen of New York can live under less than four governments: Federal, state, county, and city. If one lives in a town outside of a village, he is under five layers of government: Federal, state, county, town and school. If he lives in an incorporated village, another layer is added. If he lives in a town outside of the village, he may be in a fire, water, lighting, sewer and sidewalk district, in which case there are ten layers of government.

A citizen so situated has just too much governmental machinery to watch. It is too complicated for him to understand. I question whether there is any real need for so many overlapping units of government. I incline strongly to the view that much will be accomplished by reorganizing and simplifying the machinery of local government.

Recently a comprehensive study of this problem was made in the state of North Carolina. The conclusion reached in the report of that survey is that a radical reorganization of local govern ment is needed. It is intimated that county government is obsolete and that the county as a unit of administration may well be eliminated. It is conceded that it will take time to secure majority support for that proposal, and in the meantime it is urged that counties be consolidated and greatly simplified form of county government be set up to replace present cumbersome forms and many officials. The report of a similar study in New Jersey reaches substantially the same conclusion.

I am quite convinced that the excessive cost of local government can most effectively be reduced by simplifying the local governmental organization and structure and by reallocating the responsibility for performing various services, according to a logical analysis rather

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than by accident or tradition. I think we need to consider each service and decide what administrative unit and what size unit can most effectively and economically perform that service.

The smaller units of rural government are so unequal in wealth that some are unable to maintain satisfactory roads and schools even with excessively high tax rates, while others with very low rates are able to spend generously and even extravagantly. All overlapping of local jurisdictions should be abolished. I incline to agree with those who hold that one or at most two layers of local government subordinate to the sovereigty of the state is adequate and that we ought seriously to undertake the radical reorganization and reallocation of functions necessary to accomplish the elimination of all others.

There remains to be mentioned another remedy for the excessive cost of local government the controlling of local expenditures by state or district authority. It is familiarly referred to as the "Indiana plan." In that state ten or more taxpayers in a tax district may appeal to the state tax commission from the local budget or from a proposed bond issue. After hearing, the state tax commission may reduce the proposed appropriation or the amount for which bonds may be issued, or eliminate the item altogether.

Much can be said in favor of this method of controlling local expenditures. It has passed beyond the experimental stage in Indiana, and the information before me indicates it is supported by public sentiment. Colorado and New Mexico have modified forms of the Indiana plan. Ohio, Oklahoma and Oregon have adopted the idea, but the control is exercised through district boards. This general method of controlling the excessive cost of local gov-

Much Inevitable

Roads, for instance, are no longer merely local facilities. They are avenues of communication and channels of necessary commerce between all communities of a state and between a state and its neighbors, close and distant. So we have been compelled to build them on a greater scale and to find new ways of meeting and distributing the cost as far as possible upon those who are benefitted.

We face the question of education and we find a mandate from the state as sovereign that the children of all shall be given opportunities to learn.

The state's responsibility for education cannot be escaped by passing it on in one case to a city of teeming millions and in another to a dozen farmers scattered over miles of countryside. It is not solely on an altruistic basis that we consider the educational needs of the farm boy and girl as well as those of the tenement children in the city. The character and training of our fellow foot-loose Americans of the future is a matter of concern to us and to our descendants. They will have their part in making up the civilization in which we shall live a generation hence.

We are beginning to recognize, too, that the public health is more than a local responsibility. Disease knows nothing about town lines, nor do baccili undertake to inquire about local jurisdictions. Their carriers are on the public highways and riding in the railroad trains. If we care nothing about the fact that a farmer's children are dying of infection of malnutrition-and that can happen in the country too we can still give some thought to the weak links and the sufferers whom we may have to support in some day not far off.

Crime ceased to be a local matter and the criminal adopted a state-wide or national range, if not a broader citizenship, long before we thought it necessary to do anything about it.

As to all these matters, I expect to see an increased measure of assumption of functions and responsibilities by the state, through one means or another. We have seen how the effort to equalize the tax burden has made the state the holder of the purse strings as to a large proportion of local expenditures. This will mean inevitably a closer integration

JUNE, 1932

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JUNE, 1932 of local authority with state-wide authority with expert staffs and state-wide information will possess both an advisory and a veto power over the use of funds for local expenditure.

It seems entirely logical that local authority must consolidate, eliminating many of the local government layers, in order to retain any appropriate measure of home rule over local affairs. Certainly the time has come to give serious consideration to the consolidation of a great many local jurisdictions of one kind and another.

I should like the privilege of stating as forcibly as I can one general conclusion that has long been in my mind. That is, that too many of us have been lazy-minded in this matter of government. We like to talk in large terms about the comparative advantages and defects of democracy and autocracy; we like to admire patriotically the work of our forefathers in devising our forms of government or to criticise them as too slavish imitators, but we are terrifically dilatory in following our forefathers' example by seeking to plan and devise for our own immediate needs and for the future. Particularly, we hate the details of government. We talk about Russia's five-year plan and the excellence or iniquity of Mussolini's system, in preference to giving consideration of the question whether a town supervisor is good for anything or inquiring what a village health officer does to earn his pay. This may be because it is easier to form a judgment on matters that are more remote. I hate to think that it is because we prefer to have someone else form our judgments for us.

Democracy Being Challenged This suggests to me that those who hold public office should not be content merely to take the duties of their jobs as they find them and to carry them out according to precedent. Those who have had experience in operating the machine should be able to tell of its defects. I once heard of a public official who recommended that his job be abolished as useless. It would be a heartening and refreshing thing if there were a lot more like him.

We heard a great deal during the late war about the challenge to democracy to learn that democracy was being challenged. But I think, too, that democracy is being challenged today just as forcibly if not as clamorously. The challenge is heard right here among us from all who complain about the inefficiency, the stupidity and the expense of government. It may be read in the statistics of crime and seen in the ugliness of many of our communities. It is expressed in all the newspaper accounts of official graft and blundering. It is written on our tax rolls and even in the patriotic-seeming textbooks that our childen study in the schools. It looms large on election day when voters see before them long lists of names of men and women of whom they have never heard to be voted upon as candidates for salaried offices of whose duties and functions the voter has but the haziest impression.

The men who addressed themselves to the task of laying the framework of our national government after freedom had been won, wrote down in enduring words that their aim was to form "a more perfect union." In writing that ideal into the preamble of the Constitution of the United States, I think they set a task for us as well as for themselves. They were forming a new government, suited, as they believed, to the conditions of their day, but they were wise enough to look into the future and to recognize that the conditions of life and the demands upon government were bound to change as they had been changing through ages past, and so the plan of government that they prepared was made, not rigid, but flexible adapted to change and to progress. We cannot call ourselves either wise or patriotic if we seek to escape the responsibility of remodeling government to make it more serviceable to all the people and more responsive to modern needs.

Excerpt from an address before the Institute of Public Affairs, University of Virginia.

OREGON RETURNS TO MACHINERY The new state highway commission of Oregon has announced abandonment of the policy of constructing roads by hand labor as a means of providing relief for unemployment. The commission has assigned two reasons for its action. First is the inefficiency of labor thus employed, and second, the fact that federal aid cannot be obtained for projects constructed by hand labor. The Oregon highway commission paid out $72,000 a week for hand labor as a relief measure, and it was estimated that for the cost of one mile of road built by hand labor, eight miles could have been built by contract with the use of machinery-The Improvement Bulletin.

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