Is the challenge facing our local governments one of efficiency -- do they lack the systems to make good use of resources -- or is it one of innovation? If it is efficiency, then consolidation can address those problems. But if what we need is more innovation, we have to find a way to unleash local governments to make little bets - low risk experiments in solving problems.

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We are comfortable with the notion of consolidation here in the United States, especially in times of financial difficulty. When big airlines get in trouble, two of them will merge together with talk of efficiency and elimination of duplicating services. When the big banks got in trouble in 2008, the Federal Reserve and U.S. Treasury encouraged J.P Morgan to buy Bear Stearns and Bank of America to acquire Merrill Lynch. Again, the talk was all about how the new, larger entity could leverage resources for efficiency gains. We see this repeated in auto companies, telecommunications and media conglomerates as well. Bigger is better.

Or is it? If there is one thing that airlines, auto companies and telecommunication companies seem to have in common here in the United States it is a lack of innovation. For the latter, anyone who has been outside of the country and marveled at the ubiquitous cellular service can attest that we have terrible coverage here in the United States. When General Motors failed it was widely acknowledged that they were building an inferior product. And while we may get innovation in the too-big-to-fail banks, it is typically of the swindling variety.

If consolidation creates efficiencies, the tradeoff is the bureaucracies become bigger, more entrenched and less likely to be naturally innovative. Where companies have overcome this -- for example, a company like Google or a Minnesota example like 3M -- they have typically walled off departments into a company within a company or placed a very high value on individual experimentation. Google, for example, asks their engineers to devote 20% of their time to their own projects. But most companies are not Google. Or even 3M. 

The fact that no local government runs like a company has not kept politicians from talking about consolidation as a big part of the answer for tight budgets and failing towns. While I'm aware of the rumblings here in Minnesota, where the state proscribes the taxing policy and spending approach for all cities, a quick search revealed many places where consolidation is being discussed.

In Rhode Island, the state has set caps for local government spending increases while at the same time increasing mandates and cutting aid (a sadly familiar story). When too many cities requested waivers of the cap, people like Dr. Edward Mazze, a professor from the University of Rhode Island, suggest consolidation as the answer.

Mazze said the state should go back to the drawing board, arguing that it might be time to once again consider some form of consolidation.

“The cap made sense in good times but in today's economy, the cities/towns need to fend for themselves,” he said. “It is time to do away with the caps and allow voters on a local level to determine more taxes or less services. The solution to this problem is to rethink the type of government structure and services that Rhode Islanders want and can afford.”

Mazze said a five county government could save millions of dollars for taxpayers.

“Can a state with one million people afford 39 cities and towns? This is the time to look at a five county government with one school superintendent, one police chief, one fire chief, one maintenance department per county,” Mazze said. “We would be able to save dollars, have a more efficient system of governing, retain and attract more businesses and have lower property taxes.”

Anyone ever run into an incompetent superintendent? How about a ineffective police chief? Ever heard of a corrupt public official? I digress....

In New Jersey there is a 501(c)3 organization that has been established to advocate for consolidation. They recently issued a guide for cities looking to go through the consolidation process called Courage to Connect. Governor Chris Christie has signed legislation making it easier for towns to consolidate. 

“It’s absolutely ridiculous that New Jersey has 566 redundant municipalities,” said Gina Genovese, the executive director of Courage to Connect New Jersey and one of the book’s three authors. “We all have to work together, we have to make a sustainable structure.”

A book from Peter Sims called Little Bets: How Breakthrough Ideas Emerge from Small Discoveries reveals an alternative to consolidation. While the book never even mentions government, the concepts are powerful and would transfer well, especially at a time when reform and innovation is so badly needed. The notion of placing "little bets" -- tiny experiments in innovative approaches, many that will fail but some that will pay off -- is something consistent with American culture. From a review of the book:

The word "innovation" seems perilously overworked these days, invoked by corporate leaders and earnest politicians eager to signal progress and express faith in our ability to solve problems and improve the world. We're always ready to endorse the concept, though applying it may be another story. "I'll be happy to give you innovative thinking," a bedraggled employee tells his boss in a classic Leo Cullum cartoon. "What are the guidelines?"

Guidelines are what Peter Sims seeks to provide in "Little Bets," an enthusiastic, example-rich argument for innovating in a particular way—by deliberately experimenting and taking small exploratory steps in novel directions. Some little bets will not pay off, of course, in which case little is lost; but others may pay off in big ways.

At the local government level, we don't have a lot of innovation going on. We have competent and less-than-competent management, but we don't have innovation. That is not because our people are not innovators. It is because states typically mandate, regulate and manage affairs at the local level to the point where only a narrow band for innovation typically remains.

Consolidation is a response to inefficiency. At the local level, inefficiency is not our problem. Lack of innovation is. We have the same template of codes, regulations, budget approaches, software, staffing, street standards, policies, etc... in nearly every city in the country. Who is truly innovating out there?

As we go through this great transition, as a society we really need to clarify what we expect from local governments. Do we expect them to operate as utilities, essentially do a few, simple things well and leave it at that? Or do we expect them to take on more. Do we expect them to be the front line for developing new solutions to the problems we face?

If we want the utility approach -- efficient but dumb -- then we need to strip away much of the responsibility we have given local governments and simplify their responsibilities down to just a few. Let them plow streets, mow grass, run park programs, collect water bills and run elections. Leave all the planning, zoning regulations, infrastructure investments, economic development and tax matters to someone else. 

But if we are going to demand more from cities, then we need to get out of the way and let them become platforms for innovation. We need to remove the mandates (go ahead and replace them with measurable outcomes). We need to get rid of the parochial regulations. We need to allow local governments to experiment with different approaches knowing that many of them will not turn out well but that some of them will. Those that do will create the innovations for everyone else to adopt, customize and improve upon.

That is how little bets can create big change.

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