State Rules and Local Governance Choices

Abstract

This article evaluates the impact that states have on local governance decisions.We suggest that when states impose constraints on less politically costly tools for funding local services cities turn to cooperation with other local governments. Cooperation is politically and administratively less desirable than other solutions to the problems associated with fragmentation: diseconomies of scale and jurisdictional externalities. But when states constrain those other mechanisms, the relative merits of cooperation increase. At the margins, more cities should cooperate and cooper-ate more deeply in such situations. Using a sample of 3,664 cities across 49 states, we find that in three examples of these policy tool tradeoffs, our theory is generally supported. The degree to which U.S. states can effectively constrain the activities of local governments—and the ways in which they do so—has long been the subject of debate among observers of intergovernmental relations. The balance between municipal home rule and Dillon’s Rule is a precarious one in which local jurisdic-tions are variously viewed as run by opportunistic budget maximizers being reined in by selfless state-level policymakers or as frontline service agencies most capable of appreciating the nuanced preferences of the local electorate.