This post originally appeared on July 11, 2011.
Obviously states aren’t going anywhere anytime soon, but a number of folks have suggested that state’s aren’t just obsolete, they are downright pernicious in their effects on local economies.
One principal exponent of this point of view is Richard Longworth, who has written about it extensively in his book “Caught in the Middle” and elsewhere. Here’s what he has to say on the topic:
In the global era, states are simply too weak and too divided to provide for the welfare of their citizens…The reason is a deep, intractable problem. Midwestern states make no sense as units of government. Most Midwestern states don’t really hang together – politically, economically, or socially. In truth, these states and their governments are incompetent to deal with twenty-first century problems because of their history, rooted in the eighteenth and nineteenth centuries.
Longworth expounds upon this to identify a series of specific issues, which I’ll put into my own terms.
1. States do not represent communities of interest. With some exceptions, states consist of cities, rural areas, and regions that have very distinct histories, geographies, economies, and and event cultures. As a result, it is incredibly difficult for legislators and leaders from various parts of the state to find common cause.
Here’s how Longworth describes Illinois:
Illinois, like Indiana, is three states, and for the same reasons. The southern third, again south of I-70, is a satellite of the South – more give to conservative religions, gun racks in pickup trucks, and a deeply conservative Republicanism….Most of the rest of the state is called Downstate to differentiate it from Chicago, even though some of it, such as Rockford, is actually north of the city. It is an unfocused place…what unites this heterogeneous region is a dislike of the third region, Chicago. Chicago dominates Illinois – politically and economically…If the rest of Illinois obsesses about Chicago, Chicago gives the impression – an accurate one, in fact – of never thinking about the rest of Illinois.
Additionally, I might add my observation that this creates a situation where the policies which are right for one area may be wrong for another. Since it is the nature of governments to promote uniform rules, this often leaves one or even all regions of a state with suboptimal rules. In fairness, there are are often some types of flexibility, such as that provided by different classes of cities. But important macro policies remain one size fits all.
Consider Illinois. It’s a combination of a global city core in Chicago, a Rust Belt hinterland, and a southern fringe region. State policy is set by the Chicago elite as a general rule, and predictably it follows a big city, global city favorable model: strong home rule powers for large municipalities, a high tax/high service type model, strong public sector unions, etc. This pretty much works for Chicago, but for downstate it puts their communities in a major economic vice since they don’t benefit from global city friendly policies and are competing against other places that have optimized in other ways.
Indiana being one example. It is pretty much the opposite. Its largest city region is only about 25% of the state’s population, meaning Indiana is dominated by rural and small city constituencies. As a result, Indiana has optimized for a “Wal-Mart” strategy such as through its low-service/low-tax approach, weak environmental rules, and very weak (I’d argue nearly non-existent) home rule powers for even its largest municipalities. This is great if you are a small manufacturing city trying to beat out Ohio, Michigan, and Illinois for low wage manufacturing and distribution jobs (which sounds bad but is realistically the best short term play these places have). But it’s pretty terrible if you are Indianapolis and trying to fight to have a place in the global economy, attract choice talent, build biotech and high tech business clusters, etc.
2. Arbitrary state lines encourage senseless border wars. With limited exceptions, the major cities of the Midwest (and often elsewhere around the country) were founded on major bodies of water like rivers, lakes, or an ocean. These were often boundaries of states, thus major cities are frequently at the edge, not the center of states. This means not infrequently you find multi-state metro areas, which creates structural conflicts of interest. The logical economic unit is the metro area, but it matters from a local fiscal point of view (i.e., the ability to collect income, sales, and property taxes) where particular businesses locate. Thus we frequently see the case where localities spend tons of money on incentives simply to get businesses to relocate within the same metro area. You can have bidding wars without multiple states (such as neighboring suburbs competing over a Wal-Mart), but these seldom involve major state level incentives.
Longworth again summed this up masterfully in a recent blog post called “The Wars Between the States” where he documents the incentives being doled out to convince companies to move back and forth across the state border in the Kansas City metro area:
It would seem impossible for Midwestern states to get any sillier and more irrelevant, but they’re trying. In a time of continuing recession and joblessness, with crunching budget problems, failing schools, crumbling infrastructure and no real future in sight, these states have decided to solve their problems by stealing jobs from each other.
The most recent example is the so-called “border war” between Kansas and Missouri, as the two states compete to see how much money they can throw at businesses to move from one state to the other. The focus of this war is Kansas City — both the Kansas one and the Missouri one, basically a single urban area divided not only by an invisible line down the middle of a street but by a mindless hostility that keeps its two parts from working together.
Competition with “Europe, India, China and the rest of the world” has nothing to do with this juvenile job-raiding. In fact, this “border war” keeps Missouri and Kansas from competing globally — indeed, robs them of the tools they need to compete globally. Some rational thought shows why. It’s precisely these states’ inability to compete globally that causes them to declare war on the folks next door. In a global economy, Kansas and Missouri aren’t competing with each other, any more than Illinois, Indiana and Wisconsin are competing with each other. The real competition is 10,000 miles away and all Midwesterners know that we’re losing it.
[ Update 5/5/2014: It looks like Missouri and Kansas may be about to declare a truce in their border war ]
3. Many state capitals are small, isolated, and cut off from knowledge about the global 21st century economy. In some states the state capital is a large city that is well-connected to the global economy – Atlanta, Indianapolis, St. Paul, and Nashville come to mind. But often state capitals were selected because they were in the geographic center of the state, not because they were major centers in their own right. Some, like Indianapolis, managed to grow into major cities. But many others did not. Think Springfield, Jefferson City, Frankfort, etc. This means that the state capital of many states is not very large, and often not very plugged into the global conversation. Longworth again captures the implications of this:
There is another reason why state governments are botching the economic needs of their states. Some 150 to 200 years ago, state capitals were picked not for economic reasons, but for geographic ones. Many of them remain in this isolated irrelevance today, far from the real action of any of the territories they are meant to govern…In this era of globalization, with overnight shipping and instant communications, this shouldn’t make any difference. In fact, it does. Global cities such as Chicago depend on face-to-face contact, and isolated state capitals live out of earshot of this conversation. The winds of globalization are transforming state economies and generating new thinking about state futures, but the news takes a long time to get to the state houses and legislatures.
4. Metro areas are the engines of the modern economy, but the rules for municipal and regional governance are set by states, and often in a manner that is directly contrary to urban interests. In this Longworth channels the Brookings Institution, which has tirelessly documented the importance of metro area economies to the nation as well as all the ways states, frequently controlled by non-urban legislators who are actively fearful of cities, have often imposed enormous burdens on those metro areas by tying them down with a morass of Lilliputian rules. Again Longworth:
States set the boundaries of urban jurisdictions and decide whether or how they can merge. They tell cities who they can tax and how, whether this helps cities or not. State governments help finance local infrastructure and dictate, from miles away, how that money is spent. State priorities on education and workforce programs leave city residents incompetent to deal with the global job market. Highway funds go to rural areas, not to cities that need them more; job creation money goes to wealthy areas, not to the core of battered cities.
Some urban regions have more or less given up any hope that their state will ever change or be a positive partner, such as Kansas City, as Longworth notes:
When the Greater Kansas City Community Foundation issued a report on the city’s future, it pretty much told the state to get out of the way. “Nations and states still matter,” it said. “They particularly can do their cities harm. But cities have to take the lead. San Diego did not become San Diego by looking to Sacramento, not Seattle to Olympia.” When the authors talked about Sacramento and Olympia, one felt their really meant Jefferson City.
I’d probably go even further than Longworth. I think that historically states imposed rules on cities deliberately designed to hobble their growth. For example, the laws that restricted branch banking in most states until recently had the effect of keeping big city banks from buying up rural and small town banks around the state. The end game of course is that when deregulation occurred, the banks in most big cities were so small because of these rules, they were easy prey to out of state acquirers. Thus most states saw basically their entire indigenous banking industry swallowed up.
Also, states seem to more or less treat their urban regions like ATM machines. Every study I’ve seen documents how, contrary to popular belief, cities actually are net exporters of tax dollars to their state government. Marion County, Indiana for example (Indianapolis), sends a net of about $400 million a year to the state – enough to cover the entire public safety budget of the city.
I actually don’t have a problem with some redistribution as cities are generally economic engines and more efficient to boot, so they should be expected to be donors at some level. On the other hand, when states proceed to starve those cities of the critical funds they need stay healthy and strip them of the powers they need to manage their own affairs, this is like sticking a knife in the golden goose.
Again I can use Indianapolis as an example. As part of a tax reform package the state took over all operating educational funding for K-12. So far so good. But they also imposed a funding formula that severely disadvantaged growing suburban districts by denying them equal per pupil funding. The net result was a major funding problem for the best suburban Indianapolis districts like Carmel, Fishers, etc. Many of these districts had to go to referendums to raise local taxes to make up the difference (which was no doubt the state’s plan all along – it simply outsourced the unpleasantries of a tax increase to localities). Here is a state that claims it wants to be in the biotech business, the high tech business, etc, yet it singles out the school districts where the labor force you are trying to attract for those industries is likely to live for outsized cuts. That hardly seems like a winning strategy.
Indiana also keeps its cities on a tight leash, with some of the weakest home rule powers around. Indianapolis basically can’t do much without legislative approval (a transit referendum, for example, will require specific legislative authorization). And the legislature seems to like it that way. Indiana’s property tax caps, which I support generally from a percentage of assessment perspective, include a lot of poorly advertised gotchas. For example, regardless of assessed value, the total tax levy can only grow at a rate equal to the average personal income growth over the last six years. I’ll caveat this by saying I haven’t studied this in detail and thus may be a bit off base, but the levy cap appears to be a de facto spending cap at current levels regardless in growth of tax base. This may be ok for some, but not others that are growing say their commercial office space base at a rapid clip and need to expand infrastructure and services to support it.
Clearly many of these policies have no real benefit to the Indianapolis region, which is more or less being asked to be the economic engine of the state and finance state government without being given the tools to do that job property.
The list goes on but that should give you a flavor. Similar things occur around the country.
To this list I’ll add one of my own, which has also been richly illustrated by Jim Russell. Namely,
5. States can’t to much to help, but they can do a lot to hurt. A lot of the national debate seems to center on whether the “red state” or “blue state” model makes the most sense. But to a great extent, policy almost doesn’t matter. In Ohio, with one set of state policies, Columbus thrives while Cleveland struggles. Tennessee is a right to work state with no income tax, but Nashville booms while Memphis stagnates. Texas is doing great with its red state model, but Mississippi and Alabama not so much. And even within Texas, there are plenty of places that are hurting badly.
While good policy can set the stage for growth, it can’t guarantee local economies will prosper. But bad policies can hurt regions that otherwise would thrive. Extremes of either the blue or red model seem to lead to problems. Witness California, for example, which seems to be holding up a sign to business saying, “Get lost.”
This puts states in the difficult position of being almost being able to aspire at best to being a neutral influence on their own economy. But it’s easy for them to screw things up.
Matthew hall says
does this help to explain why almost all the most successful metros are the single dominate metro of their state?
Bob Cook says
Interesting that since you posted this, a lot of states have consolidated power by voting to remove the ability of local governments to raise taxes, pass certain ordinances or other do something to ensure the dominant political party at the state level can prevent anything it doesn’t like at the local level. Even the idea of nullification from the federal level has come back. So if states are an anachronism, at least those running them are grabbing power while they still can.
I still wonder how Cincinnati would fare being in just one state as opposed to three. How much stronger might it be economically if it weren’t viewed as a competitive field at best and a resource grab theater at worst by three separate state governments?
For that matter, what if the larger mega-region had organically developed around Cincy, unencumbered by the state governments of Ohio, Indiana and Kentucky? Would Cincinnati have better-maintained its status as a de facto regional capital? Or even have achieved a more official status in an organic relationship between itself and Dayton, Louisville, Lexington, Indianapolis and Columbus? Would the latter two cities even exist today in a form similar to what they have achieved, being designated capital cities above all else?
The founders clearly never envisioned a world in which our cities would grow to become sprawling metropolises. It is intriguing to weigh just how much the policies of the late 18th century have shaped and influenced our world today, and not necessarily in a manner that we can see in the early 21st century as being ideal.
I wonder about the Cleveland-Pittsburgh mega-region too. Interesting to see the PA side doing so well while the OH side continues to flounder, though renewed in both continues to surge at least at the local level. Again, what would a shared, organic relationship mean for both had such taken priority over state governments with different sets of priorities and focus points?
Chris Barnett says
1. @EJ, I think the “what if” here is “what if Cincinnati had been made the capital of Ohio in 1803 and remained so until today”. But I suspect it dominated the state from the river then, in much the same way as Chicago dominates Illinois now. I don’t know the history of how that played into the decision to move the capital from Chillicothe to Zanesville and then Columbus.
2. @Aaron, I’d add Lansing to the “small mid-state capital with minimal influence on state affairs” list, despite the presence of a Major State University.
But then…how does one explain Madison? It is definitely Wisconsin’s second city.
George Mattei says
If Illinois is dominated by Chicago, and Indiana by the rural areas, then Ohio is a basket case. It has enough urban areas to add up to the size of Chicago, more or less, but they are spread all over the state in a decentralized manner. Additionally, they have very different MO’s, from liberal labor manufacturing centers up north to crossroads cities in the middle to more conservative enclaves down south.
This is why it’s a swing state and also why conservatives seem to have a small but somewhat durable advantage-at least on the State level.
George Mattei says
My observations are that states and even city and county lines definitely matter. Maybe they should matter less than they do, but they do.
Beyond policy and politics, they matter in people’s conscious and subconscious.
When I moved from Franklin County and Columbus City to a small fringe town just over the border in Fairfield County, my own focus became much more attuned to happenings in Fairfield County, not just Franklin. My wife works in Fairfield County government, so that helps, but it’s still a major influence. I still pay attention to Franklin County too, because I work there and I am interested in the urban goings-on in Columbus.
I live about a mile from Pickaway County now as well. I have to be honest, I basically never go to Pickaway County. Besides the fact that the major roads are not oriented that way, I just don’t have a reason to go. I don’t know many people from there, don’t know the roads there, nothing. It’s almost like it doesn’t exist. That can’t be arbitrary. I think that my own living in Fairfield County and the fact that the people I know are from there draw me naturally to Fairfield.
Chris Barnett says
LOL George. I have family and family history all over the place there…all those counties and several more in the metro or exurbs.
But it’s all “Columbus, Ohio” to me, just as NW Indiana and what’s across the border from it is all “Chicago”.
wkg in bham says
If there is one city/metro that dominates its state it would be Mr. Renn’s new home town of Providence. How’s that working out?
Anyone here care to comment of Chicago’s relationship with its own suburbs? I’m led to believe there’s a real Northside-Southside divide in Chicago. Can the metro unite to address metro-scale issues?
Joe Schmoe says
On certain issues like economics, transportation, social policy etc. cities should be ruled by metropolitan governments like they do in many countries. State governments have become completely irrelevant and even harmful to metropolitan areas in the 21st century.
david vartanoff says
Time to re-read The Nine Nations of North America by Joel Garreau. A fine delineation of where the community of interest borders are.
Robert Munson says
Thanks for running this again. It reminds me, once again, how every level of government needs a major overhaul so the pieces work together in the transformation from the nation-state to what I sometimes call “the sustainable state.”
We see how little has changed in the 3 years since you wrote this. Clearly, conditions have only worsened. One Commenter even may be correct in that states are trying to grab power from cities.
And David’s suggestion to read “Nine Nations’ also reminds me that changing state powers will be difficult … because that very sensible book was written over 3 decades ago and I know of only a few of those nations that have quasi-voluntary, single-issue associations… an example being that much of the Foundry Nation shares the Great Lakes via Treaty… but hardly a devolution of governmental powers.
So given that there has been too little progress, my hope mostly derives from our founding phrase “When in the Course of Human Events, it becomes necessary for one People to dissolve the Political Bands which have connected them…”…..
Now soon to turn 240 years and probably three revolutions in economy later, what now becomes our strategy to get economy and government in sync ?
Let’s alter another founding phrase into “no new taxation without new representation.”
My state (Illinois) is insolvent and we will have a major tax increase after this election. As a first step, why not re-shape a successful strategy and combine the update of these two founding phrases?
Why not agree to bail-out Illinois only if it starts devolving sub-regional powers to the metropolis… or at least the cities?
Alon Levy says
I don’t think it’s really true that a metro area needs to dominate its state to be successful. Consider the success of the Bay Area, Miami, and Houston, and the lack of success of Detroit and Atlanta.
As for the example you give of Indiana’s school funding formula, I’m deeply suspicious of this. What you’re saying is that Indiana should make no attempt to equalize per-student funding, and instead offer rich districts the same resources it offers poor districts. This is the exactly wrong way to do it, and it’s why so many people hate capitalists. It’s crucial for the state to invest in the educational outcomes of everyone, not just the rich; people who are borderline illiterate can’t get jobs, not even at transplant factories, which will relocate elsewhere. Having entrepreneurs is nice and all, but if they don’t have anyone to employ, they’ll start their companies elsewhere.
But even that focus on rich suburban districts as the generators of enterprise is wrong. Of course that under the present-day regime of unequal funding across school districts, the entrepreneurs all come from the rich districts. That’s not surprising; you might as well talk about how, in a racist regime in which blacks can’t start businesses (e.g. pre-1960s America), the entrepreneurs are white and therefore the state should focus on white education. If the US educational system rewarded merit rather than being born in the right school district, things would look considerably different.
Aaron M. Renn says
Alon, in Indiana the state pays for basically all operational costs of schools other than transportation. The local taxes only fund buses and capital projects. Thus higher state aid isn’t necessary to equalize funding between districts. I’m fine with the state giving more aid to schools with large populations in poverty as those students have disadvantages that require additional services to address. On the other hand, when your fastest growing districts in the state are in the bottom five statewide in per pupil funding (out of hundreds of districts), clearly this was not an accident. Local districts can raise supplemental operations funds if necessary, and that’s what those districts ended up doing (some of them at any rate – at this point it’s very rare to see districts raising supplemental funds, as it requires voter approval). Clearly, this was a deliberate set up by the Tea Partiers that run the legislature to outsource a tax increase they were too cowardly to make themselves. That’s the crux of my problem with it.
Also, while some redistribution is great, when you start treating higher income payers like ATM machines, you run into practical problems, especially in places like Indiana with limited intrinsic appeal to that demographic. New York and San Francisco do more redistribution than most places for one simple reason – they can.
George Mattei says
@wkg-Providence is not a good example, because it’s not one governmental unit. It’s actually very fragmented at the local level. Then you overlay a State structure on top of that, and you don’t have anything near a regional governance model.
We also can’t forget that States are a vital part of our federal balance of power. States have certain powers that the Feds don’t, or they can at least counterbalance some of the Fed’s powers. Now this has clearly been quite diluted since Revolutionary times, but it’s still a valid check and balance.
My thought on a good system would be to have the following:
-States that do basically what they do now,
-then regional governments (somewhat like a super-county with some local powers)that do regional things like transit, economic development and lay out general planning and growth guidelines (i.e. comprehensive planning, where do we put the next big new highway exit/water line to encourage growth) as well as aggregative admin functions like auditing and recording
-then local subdivisions (kind of like Boroughs in New York)handle more micro issues like zoning cases, collecting the garbage, plowing, policing, maintaining parks, run local schools, etc.
This way you get some local focus and differentiation while still getting the benefits of regional governance. The regional government would receive a cut of all the tax revenue and would use that for regional infrastructure and economic development, and could do some revenue sharing to poorer districts.
Alon Levy says
New York actually has extremely segregated schools, and until very recently had factor-of-two disparities in per-student spending between the city and the rich suburbs.
Do we really need to maintain so many layers of government? States seem redundant in a reformed system that supports regional governments focused on metropolises. My fear is that we would end up with many more situations like the “Super City Council” of Indiana/Indianapolis, where state govts. still go out of their way–and are very successfully able–to hogtie and hinder cities, even those that operate at a regional or quasi-regional level.
At the very least, if the states do survive, maybe we need to look at carving out “independent metropolitan districts” for our major metropolitan regions that supersede state authority, not completely unlike the District of Columbia. In fact, D.C. already establishes precedent for such a measure, albeit with some significant flaws such as lack of voting representation in Congress. A new constitutional amendment could address this and allow for the creation of additional federal districts throughout the country.
Matthew hall says
As a metro economy Atlanta is very successful. Miami is a Switzerland for South American wealth. It’s internal job market is not particularly successful. Miami’s crime and corruption are on a level beyond that experienced by most Americans. It’s only from the perspective of South Americans that it seems we’ll run. State government is so minimalist in Texas that it’s city’s are like independent principalities in many ways. I still think there is something to the relative distribution of urban power within states.
Chris Barnett says
I think the “center of state” capitals were originally attempts to emulate DC; remember that DC’s city council was once Congress, and its home rule and electoral votes are a relatively recent phenomenon. Well, recent to me since it’s in my lifetime.
I’d argue that counties in metropolitan areas are the anachronism. Even in rural areas. Most around the US were sized to be a day’s ride on a horse from edge to courthouse/county seat…which makes it about a 20 minute drive today. States might more reasonably be reorganized into regions, both metropolitan and rural.
But this will never happen because “all politics are local”. Aaron may recall the fight to get rid of township-level government in Indiana (one of only a handful of states where all territory is divided down to that level with some kind of local governance). Townships and counties are the minor leagues for state politics…and it’s those same politicians who would have to rewrite the state constitutions and laws to enable rational modern governance.
Unfortunately, the “original intent” crowd holds our 18th-century political structure sacred. Heaven forbid that we should look at what we really need for effective governance and government spending.
I am particularly on this theme because we just had primary elections in Indiana yesterday. Turnout was abysmal, and for the first time in I don’t know how long, I didn’t vote…for the simple reason that there weren’t any significant competitive races on the primary ballot (plus, as an independent it bugs me to have to take a party primary ballot and imply that I will vote for a majority of that party’s candidates in November).
Civic activist friends may criticize me for not voting…but the problem is that I can’t change the system by voting. So maybe someone will figure out that the low turnout is a reflection on the system. The state legislature gerrymanders safe seats to the point where a 57-43 Republican voting majority turns into a 69-31 supermajority in the state house. (If we were describing a former Soviet republic, or Venezuela, we would call this a majority power-grab.)
So voting in the loaded primary will help by: [fill in blank]?
Yeah you’re right Chris. I think I am only motivated to vote in some primaries in order to: 1. beat a particularly odious candidate; 2. insure that a real “whack job” represents the party for a easy defeat, or 3. as a hedge in case the other guy from the other party cant pull it off in November.
Robert Munson says
This has become an interesting discussion for me, but still doesn’t answer the question of why urbanist blogs talk so little about political reform… when the need is so obvious, particularly at the federal level in which campaign spending (post-Citizens United ruling) is designed to prevent intelligent debate and now (McCutcheon ruling) special interests legally can protect their raids on the Treasury.
Part of the answer urbanists skirt this tragedy is that, on a relative basis, local governments still get things done… or at least there remains hope that they can. Their dysfunction is substantially less and corruption is more of a news item than a block to better policies.
For state governments to allow meaningful metropolitan governments, urbanists now have insufficient allies. The feds will remain a dysfunctional slaughter-ground for reform for a decade or longer. At the other end, few local politicians seem to have the foresight or power to influence the state to devolve more responsibilities.
So, the best hope I have evolves out of the new crisis: the insolvency of states. They need bailouts. And these should only be given if states give up powers to regions and municipalities. As I said in my earlier Comment, Illinois is a testing ground for this new deal.
Without a strategy that has even a small chance of succeeding, reducing the redundancy of states, counties and townships strikes me as a hopeful discussion; but is not promising.
A couple of interesting developments, in recent years, from out here in Oregon:
1) State government subsidizes public school transportation–if it’s yellow bus service. It refuses to subsidize Portland Public Schools, which instead of running yellow bus service, instead buys its students TriMet passes. Ignoring the subsidy, this is actually cheaper for the district, and the pass can be used for all trips on TriMet, not just travel to and from school. Since the state won’t chip in for this, though, PPS pays for this out-of-pocket, with contributions from TriMet (which offers the passes at a steep discount below its normal student fare) and the City of Portland.
2) While the city of Portland and its suburbs (on the Oregon side of the Columbia) coordinate urban planning (and many other services) under the auspicies of Metro, the regional MPO–Metro is relatively toothless in ensuring that such plans are followed. Several suburbs are engaging in revolts against things like upzoning and transit development, passing laws (via initiative) that severely restrict the municipalities’ ability to participate in planning activities for high-capacity transit (or to help with funding it once projects are approved). Such things are largely contrary to Metro’s planning activities, but as Metro has little home-rule (unlike cities and counties, which have extensive home-rule power in Oregon), there’s not much Metro can do in response. The Oregon Legislature is unlikely to attempt to overturn any of these laws.