Functional responsibilities of municipal government: Metropolitan disparities and instruments of intergovernmental management

Abstract

Chinese

This paper examines the functional responsibilities of municipal government, in the context of intergovernmental interactions in metropolitan areas of the USA. It presents an operationalisation of the functional responsibilities of municipal government: measures of size and breadth of those responsibilities assess the reliability of the findings across those related measurements. Alternative explanations are tested for differences in the functional responsibilities of municipal government in metropolitan (metro) areas. The central finding is that the functional responsibilities of municipal government vary widely; additional findings are that regional and intergovernmental contexts shape those responsibilities, based on a pooled time-series analysis of municipal governments. The paper reports census-normalised data that can be utilised for research extensions. Although its primary contribution is to research on functional responsibilities of municipal government, the paper also proposes a local public economies approach to identify factors influencing the breadth of those responsibilities in metropolitan areas.

Keywords

functional (service) responsibilities intergovernmental management metropolitan areas municipal longevity

Introduction

Municipal government is a fundamental type of government, considering the size and breadth of services it delivers to citizens (Liebert, 1976). While other governments have relevant responsibilities, municipal governments are generally in charge of core local functions. This is the case of services, for example, derived from the general-purpose powers of municipal government. Based on those powers, municipal governments are granted with authority to regulate for the public ‘health, safety, and general welfare within their territorial jurisdiction’ (Briffault and Reynolds, 2016: 13). Functional responsibilities can be broad for municipalities in metropolitan areas, where they are responsible for urban services. The responsibilities of municipalities, however, vary dramatically across metropolitan areas (Anderson, 2014). While some municipalities have limited functional responsibilities, other municipalities have a broad range of responsibilities (Stein, 1990).

What determines the service responsibilities of municipal government? The significance of this question, for theory and practice, is related to the functions of municipal government in intergovernmental systems (Stephens and Wikstrom, 2007). By exercising those responsibilities, municipal governments have a direct impact on the accessibility of services in urban communities. In a broader context, the functional responsibilities of municipal government are of importance because different scopes of responsibilities are delegated by the states (in the USA) to municipalities (Bowman and Kearney, 2017; Krane et al., 2001). By delivering different services, municipal governments ultimately shape wellbeing and quality of life outcomes at a local level. Whether to broaden, maintain, or retrench those functional responsibilities are therefore critical decisions for urban communities (Anderson, 2014; Frug and Barron, 2013). Furthermore, these decisions are relevant not only for municipalities but also for the states that grant public functionality to municipalities to begin with.

A first purpose of this paper is to present an operationalisation for the concept of functional responsibilities of municipal government. This concept has been proposed to study the assignment of service responsibilities to different levels of government in intergovernmental systems (Stein, 1990; Zimmerman, 1976). Building from this literature, the paper concentrates, more specifically, on the functional responsibilities of municipal government in the context of metropolitan areas. Differences in functional responsibilities are patterns of substantive importance that need to be investigated; those responsibilities of municipal government continue to evolve.

Two principles are used to conceptualise the functional responsibilities of municipal government. An inclusive conceptualisation of functional responsibilities would be responsive to the following conditions (Clark et al., 1982; Wiersema and Bowen, 2008):

It should be able to summarise the size of services provided by municipalities. This first conceptualisation, functional size, reflects the size of service responsibilities. As a baseline conceptualisation, it allows us to describe the overall presence of municipal government in intergovernmental systems (Ostrom, 1999; Schneider, 1986).

It needs to take into account differences in the breadth of services on a function-by-function basis. The concept of central interest therefore will be the breadth of functional responsibilities or functional breadth for brevity (Foster, 1997; Liebert, 1976). Following these criteria, the functional breadth concept accounts for differences in the breadth of functional responsibilities of municipal governments.

To operationalise these concepts, measures of size and breadth of functional responsibilities are empirically reported, using 26 functions: air transportation, corrections, finance, fire, judicial, general staff, general buildings, health, hospitals, highways, housing, libraries, natural resources, parking, recreation, police, inspection, welfare, sewerage, waste management, ports, stores, water, electricity, gas, and transit (Census of Governments [COG], 2012). Size and breadth of responsibilities, though specific operationalisations, are conceptually related. The findings, reported in subsequent sections, appear consistent with that conceptual relationship.

The following areas are the focus. First, the research has direct implications for the study of functional breadth of municipal government in economically developed regions, particularly of North America. A second purpose is, using a local public economies perspective, to explore factors that affect the functional responsibilities of municipal government (Ostrom et al., 1961; Parks and Oakerson, 2000). Specific factors of interest are the regional context of interaction between municipalities and intergovernmental instruments that support them. The general proposition is that intergovernmental management may be needed to address differences in functional responsibilities (Agranoff and McGuire, 1998; Radin, 2012; Wright, 1988). The focal perspective of this paper is local public economies – a perspective originally related to, but distinguishable from, public choice scholarship (Boyne, 1996; Oakerson and Parks, 2011; Ostrom, 1999). In the concluding section, I revisit some limitations of this approach and implications for future research.

Related literature

‘Local public economies’, as defined by Oakerson and Parks, represent the sets of public jurisdictions that ‘interact in various patterns to provide and produce public goods and services within a specific locality or region’ (2011: 147). The present study advances local public economies research by considering specific municipal and intergovernmental features of metropolitan regions over time. The first hypothesis involves the longevity of municipalities operationalised by their time of incorporation; through time, an incorporated municipality provides communities with self-governing capacity to meet the demand for services (Briffault and Reynolds, 2016). The second hypothesis focuses on the regional fragmentation of municipalities, examined by the number of municipal jurisdictions and fiscal disparities between those jurisdictions. Municipal interactions induce their functional specialisation, whereas the functionality of municipal government is nested in intergovernmental systems (Parks and Oakerson, 2000; Wolman, 2008). The third hypothesis focuses on interlocal cooperation as a mechanism supporting the provision of services, and the fourth hypothesis distinguishes state programmes of assistance intended as a response to patterns of metropolitan disparity.

Longevity and interaction of municipalities

Time of incorporation

Municipal incorporation is the most fundamental mechanism for enabling self-governing capacity for unincorporated communities (Rice et al., 2014). When incorporation is viable, an unincorporated community attains that independent capacity through the incorporation of a municipal government. Demand for services typically motivates initiatives for municipal incorporation. Incorporation allows for direct control of services by unincorporated residents (Leon-Moreta, 2015). After their incorporation, municipal governments are able to provide general policy functions (Briffault and Reynolds, 2016).

Longevity is one mechanism that underlies the capacity of municipal government to deliver services (Frederickson et al., 2015). After incorporation, a municipal government develops organisational structures to perform its functions. Developing those structures, however, is costly and requires time; in their first years, municipalities focus on establishing their housekeeping functions. Newly incorporated municipalities first develop core governmental functions, such as public safety, land use regulation, and administrative functions (Rice et al., 2014). Subsequently, municipalities are able to extend their breadth of functional responsibilities.

Over time, municipalities expand their range of service responsibilities, especially in the presence of growing population needs (Liebert, 1976). Owing to a growing demand for services, the functional responsibilities of municipalities tend to increase. Their longevity could also reflect a dynamic process of professionalisation or institutionalisation of these governments (Frumkin and Galaskiewicz, 2004; Wheeland et al., 2014). Over the years, incorporation therefore embodies a fundamental dimension of a municipal government’s capacity to deliver public goods and services.

Older governments, for example, central cities, benefit from pre-existing economies of scale allowing them to provide broader services (Fujita and Thisse, 2013). Because offering services requires start-up costs, municipalities are able to distribute those fixed costs of service provision through time. This is one reason why newer municipalities sometimes contract with central cities for the delivery of services. Those municipalities will be able to increase their production capacity by building economies of scale and then insourcing the production of services (Warner and Hefetz, 2012). Consequently, economies of scale could allow municipalities to produce new services or extend existing ones.

In local public economies, the provision of services is first enabled by the incorporation of municipal governments (Parks and Oakerson, 2000). This research examines the longevity of incorporated municipalities and its role in extending their functional responsibilities. Incorporation is the originating mechanism providing governments with functional capacity, while longevity extends their capacity to deliver service responsibilities.

Hypothesis 1a. As the longevity of a municipal government increases, its functional breadth will increase.

Owing to demand for services, and longevity, the functional responsibilities of municipalities will increase over time. In their early years of incorporation, municipalities promptly expand resources to meet the demand for services (Rice et al., 2014). The influence of institutional longevity, however, takes place primarily in the first years; that is, the effect of longevity would be more pronounced among newly incorporated municipalities and gradually level off among older municipalities. Since the effect of longevity on functional breadth should mainly occur in the early years of incorporation, the ability of municipalities to increase their service responsibilities will come in later years to a steady state.

Hypothesis 1b. The effect of longevity on functional breadth will gradually level off over time.

Municipal jurisdictions

The fragmentation of municipalities has been linked to the functional specialisation of governments in city-regions (Hamilton et al., 2004; Ostrom et al., 1961). Jurisdictional fragmentation allows for different packages of services that municipalities would offer to meet demands for services (Hendrick and Shi, 2015; Rhode and Strumpf, 2003). Regional interactions thus induce municipal governments to tailor services to specific populations (Kenyon and Kincaid, 1991; Stein, 1990).

Municipalities are the core providers of public goods and services in metropolitan areas (Frug and Barron, 2013; Liebert, 1976). Their fragmentation, however, enables a ‘market’ of alternative service providers that allows residents to shop around for a municipality providing them with a preferred package of services (Fisher and Wassmer, 1998; Stein, 1990). A multiplicity of municipalities would result in differentiated services, as those municipalities compete to satisfy the preferences of mobile residents. Prospective residents would be able to move to a municipality offering them a preferred package of services (Ostrom et al., 1961).

The presence of multiple municipalities thus leads to their functional specialisation, with some jurisdictions specialising in limited services and other jurisdictions providing broader services. Patterns of municipal fragmentation vary, however, across metropolitan areas: in the USA, some metro areas are highly fragmented, whereas other metro areas are more consolidated. (A strand of literature suggests that consolidation may be conducive to citizens’ satisfaction with services. See, for references, Leland and Thurmaier, 2010; Lyons et al., 1992).

A specific implication of fragmentation is disparities in fiscal capacity among municipalities. To explore this mechanism, fiscal disparities may be conceptualised as the unevenness in fiscal capacity of municipalities in a region (Altshuler et al., 1999; Gordon, 2012; Rhode and Strumpf, 2003). Not only a municipality’s fiscal capacity matters for its role in the provision of services; a municipality’s fiscal capacity relative to other municipalities in the same region may also matter for explaining differences in their functional breadth (Ladd and Yinger, 1991).

Fiscal disparities stem from the presence of economically distressed municipalities and affluent municipalities in a metropolitan region (Bahl et al., 1992). Fiscal disparities will therefore change by changing economic conditions among municipalities. Wide disparities will have a restrictive effect on municipalities whose fiscal capacity is lower than the capacity of other municipalities (Jimenez, 2014). Fiscal disparities, because of diminished capacity of affected municipalities, will impact the responsibilities of municipalities in service provision.

Fiscal disparities stem particularly from a differential ability of municipalities to raise tax revenue (Hendrick and Shi, 2015). Taxing is a fundamental capacity because tax revenue is the main source supporting municipal services (Alm et al., 2011). Although the choice of tax source depends on economic conditions and policies, tax revenue generally is the largest proportion of revenue supporting municipal services. Because of disparities, some municipalities are able to raise higher shares of revenue than other municipalities in the same region (Altshuler et al., 1999).

The local public economies perspective recognises the presence of regional disparities in fiscal capacity. The literature proposes, as for policy options, the use of fiscal instruments for redressing them (Gordon, 2012; Musso, 1998). Absent policies of equalisation, however, fiscal disparities would disproportionately affect municipalities having a limited ability to use their own revenues to meet their functional responsibilities.

Hypothesis 2a. As the number of municipal jurisdictions increases in a metropolitan area, their functional breadth will decrease.

Hypothesis 2b. As fiscal disparities between municipalities increase, their functional breadth will decrease.

Instruments of intergovernmental management

Interlocal cooperation

An intergovernmental response to fragmentation is programmes of interlocal cooperation (Kwon and Feiock, 2010). To examine the effect of interlocal cooperation, it is useful to differentiate between the provision of services and the production of services (Parks and Oakerson, 2000). The provision of services refers to decisions on whether and to what extent services will be provided, whereas the production of services refers to decisions on how and by whom those services are actually produced. In local services, provision involves decisions on the level of services, whereas production involves alternative mechanisms of production such as interlocal service agreements. This research focuses on interlocal transfers to operationalise the level of fiscal cooperation among municipalities. (Municipalities nonetheless may collaborate through various fiscal and non-fiscal mechanisms; see, for references, Carr et al., 2009; Feiock and Scholz, 2010; Goldsmith, 2001).

One type of interlocal transfer is due to reimbursements a municipality receives from other local governments to produce services (Parks and Oakerson, 2000). These reimbursements are contractual payments, whereby a municipality is compensated by other localities for the extension of services to them. Local governments opt to receive services by interlocal contracting for its potential benefits (Zeemering, 2016). Generally a larger government, such as a central city, can take advantage of scale economies in the production of services (Carr et al., 2009; Krueger et al., 2011). Therefore other municipalities can choose a service level, while contracting with a larger city for the actual production of that service (Parks and Oakerson, 2000).

While bilateral contracting is a common reason for interlocal transfers, multilateral regional agreements can also explain interlocal transfers between municipalities (Andrew and Hawkins, 2013). Through regional agreements, municipalities operate together to produce services. In some regions, interlocal transfers are intended as revenue sharing for supporting specific services; in other regions, interlocal transfers are part of comprehensive organisational arrangements, such as the consolidation of functional responsibilities into regional agencies (Chen and Thurmaier, 2009; Savitch and Vogel, 2000).

Interlocal transfers can be specifically intended to redress fiscal disparities. In these cases, a municipality transfers resources to another municipality under programmes of fiscal equalisation (Nunn and Rosentraub, 1996). Interlocal equalisation may be of interest because of the potential ability to mitigate fiscal disparities at a local level. The impact of disparities would motivate the use of interlocal transfers as supplemental mechanisms to fund services. They can also be encouraged by state policies that require affluent municipalities to transfer resources to economically distressed municipalities (Bahl et al., 1992; Gordon, 2012).

The local public economies perspective includes interlocal cooperation as an alternative mechanism for the production of services (Parks and Oakerson, 2000). The conceptual differentiation between production and provision has implications for the service responsibilities of municipalities, as the production of a service can be separated from its provision. This research focuses on interlocal transfers to operationalise the level of fiscal cooperation, inclusive of contractual reimbursements and revenue sharing between municipalities. Interlocal transfers, by supporting service production, can broaden the service responsibilities of municipal governments.

Hypothesis 3. As the level of interlocal cooperation increases, the functional breadth of municipalities will increase.

State programmes of assistance

State assistance involves a set of specific instruments of intergovernmental management influencing the functional breadth of municipal government. In an intergovernmental system, grants adjust the distribution of resources between central and local levels of government (Musso, 1998; Pagano and Hoene, 2010). The states specifically employ grant programmes to assist municipalities, supporting their ability to deliver services. Based on those external resources, on top of own sources, the functionality of municipalities could increase. Intergovernmental grants raise the fiscal capacity of municipalities, generally more so than own sources of revenue (Deller and Maher, 2006; Oates, 2011).

By expanding their fiscal capacity, intergovernmental grants may mitigate fiscal disparities between municipalities (Gordon, 2012). When the capacity of municipalities is limited, higher levels of intergovernmental funding may allow municipalities to extend their service responsibilities (Peterson, 1995; Stein, 1990). As compared with tax revenue, intergovernmental grants are a relatively low-cost source of revenue (Oates, 2011). Even when grants require matching funding by local governments, grants can still relieve the economic burden of service provision, as compared with the provision of services funded by tax revenue only. This mechanism, a ‘flypaper effect’, predicts that intergovernmental funding expands local government services (Deller and Maher, 2006: 213).

Depending on their fiscal capacity, municipalities confront a tradeoff between revenue and services affecting their breadth of responsibilities. Higher levels of intergovernmental funding may allow municipalities to resolve that tradeoff in favour of broader functionality. State grants are the largest source of intergovernmental assistance to municipalities (Census of Governments [COG], 2012), although federal grants support municipal services as well. State grants are therefore the focus, while recognising that federal grants are important in specific functions of municipalities. Although grants can be a major source of local revenue, wide differences are prevalent in the size and composition of state grants (Peterson, 1995).

The states employ categorical grants, general grants, or both, to support the functional responsibilities of municipalities (Deller and Maher, 2006; Pagano and Hoene, 2010). Whereas categorical grants are restricted to specific functions, general grants can be used for any purpose. While both can mitigate disparities, categorical and general grants have different implications (Peterson, 1995). From a municipality’s perspective, general grants are flexible resources because they can be allocated to any function; by contrast, categorical grants are stipulated with functional restrictions and often with matching requirements. Accordingly, those grants are to be differentiated when evaluating their impact on the functional breadth of municipalities.

While both categorical and general grants support local services, their relative proportion in state programmes of assistance is a key mechanism of influence (Deller and Maher, 2006). When categorical grants are larger in size, they will be more influential than general grants. Another mechanism of influence is whether grants are allocated to central functions only or whether those grants are allocated to alternative functions. When categorical grants are allocated to functions that municipalities would be unable to provide for by themselves, categorical grants are likely to expand the functional breadth of municipalities (Peterson, 1995). In contrast, general grants tend to be allocated to the central functions of government (Deller and Maher, 2006). Then categorical grants would have a greater influence on the breadth of functional responsibilities of municipalities.

Local public economies include instruments of intergovernmental assistance supporting the functional responsibilities of municipal government (Parks and Oakerson, 2000; Peterson, 1995). This perspective builds on principles of fiscal federalism: state grants can be central instruments of fiscal management for the allocation of resources across levels of government (Musso, 1998; Pagano and Hoene, 2010). Because regional disparities stem partly from disparities in revenue capacity (Rhode and Strumpf, 2003), state grants may be relevant fiscal instruments for the reallocation of resources across levels of government (Oates, 2011).

Hypothesis 4a. As state categorical grants to municipalities increase, their functional breadth will increase.

Hypothesis 4b. As state general grants to municipalities increase, their functional breadth will increase.

Empirical framework

The unit of analysis is a US municipality as defined by the 2010 Census of Population. The empirical frame includes all municipalities in metropolitan areas (non-metropolitan municipalities are removed). This focus is important, as discussed, because of the specific context of intergovernmental interaction in metropolitan areas. The final sample includes approximately 83% of the frame, because of missing observations from the COG, the source of data for the dependent variable. The N is 7102 municipality-years for 1982; 7630 for 1992; 7901 for 2002; and 8095 for 2012. The growing observations reflect incorporation of municipalities over time.

Focusing on metropolitan areas, the functional responsibilities of municipalities are examined over the last four decades. When observing metro areas over time, however, one hurdle is that these areas are redefined by the Census Bureau every decade. To ensure comparability, I employ proprietary data from GeoLytics, a US developer of historical census data sets. GeoLytics (2014) has normalised data from the censuses, based on a consistent definition of metropolitan areas. Based on the 2010 definition of metro areas, municipalities are tracked over the last four census decades. This section summarises the data; Table 1 provides complete definitions and sources.

Table 1.

Data.

Variable	Definition and sources	M (SD)
Functional responsibilities
Functional size	Sum of the functional expenditures of a municipal government. The sum of expenditures (in historical dollars) is deflated for comparability by the consumer price index of the Bureau of Labor Statistics, weighted to per-capita levels, and transformed into the natural log. Sources: Bureau of Labor Statistics (consumer price index) and Census of Governments (expenditures) 1982, 1992, 2002, 2012	5.605 (1.097)
Functional breadth	Breadth of the functional responsibilities, measured as the entropy index. More formally, $breadth = \sum_{f} S_{f} \times \log (1 / S_{f})$ . Here, $S_{f}$ is the percentage of a municipality’s total expenditure in a function f. The $\log$ operator is the natural log of the second factor in the formula. And the Σ operator adds together the individual results into the index of functional breadth (entropy). Twenty-six functional responsibilities are included: air transportation, corrections, finance, fire, judicial, general staff, general buildings, health, hospitals, highways, housing, libraries, natural resources, parking, recreation, police, inspection, welfare, sewerage, waste management, ports, stores, water, electricity, gas, and transit. A lower score indicates limited responsibilities; a higher score indicates broader responsibilities. Please see Wiersema and Bowen (2008) for additional discussion regarding the entropy index. Sources: Census of Governments 1982, 1992, 2002, 2012	1.617 (0.516)
Longevity and interaction of municipalities
Years of incorporation	Years from municipal incorporation to the present. It equals the year of each time set minus the year of incorporation: thus years to 1982 equal 1982 minus the year of incorporation, years to 1992 equal 1992 minus the year of incorporation, years to 2002 equal 2002 minus the year of incorporation, and years to 2012 equal 2012 minus the year of incorporation. The years are transformed into the natural log. Sources: Census of Governments 1987 and the Census Bureau’s Boundary and Annexation Surveys 1988 to 2012	4.325 (0.705)
Years of incorporation²	Square of the preceding variable	19.207 (5.404)
Municipal jurisdictions	Number of municipal governments in a metropolitan area, weighted to per-capita levels and transformed into the natural log. Sources: Census of Governments 1982, 1992, 2002, 2012	4.147 (0.794)
Municipal disparities	Fiscal disparities between municipalities, calculated as the coefficient of variation in per-capita municipal revenue. More formally, $coefficient = (\sqrt{\sum_{m} P_{m} {(T_{m} - \bar{T})}^{2}}) / \bar{T}$ . In the formula, $T_{m}$ is the natural log of per-capita tax revenue for a municipality m. $\bar{T}$ is the average per-capita tax revenue of municipalities for the metropolitan area. $P_{m}$ is a municipality population as a fraction of the metro-area population. Every municipality is weighted by its $P_{m}$ fraction so that a municipality adds to the coefficient of variation based on its relative population. This weighting allows for comparability of coefficients of variation across metropolitan areas. A lower coefficient indicates lower disparities; a higher coefficient indicates higher disparities among municipalities in the metropolitan area. Please see Rhode and Strumpf (2003) for additional discussion regarding this coefficient. Sources: Census of Governments 1982, 1992, 2002, 2012	0.190 (0.113)
Intergovernmental management
Interlocal cooperation	Interlocal transfers to a municipality from other local governments. The transfers (in historical dollars) are deflated for comparability by the consumer price index, weighted to per-capita levels, and transformed into the natural log. Sources: Bureau of Labor Statistics (consumer price index) and Census of Governments (transfers) 1982, 1992, 2002, 2012	6.036 (5.886)
State categorical grants	State categorical grants to a municipality. The grants (in historical dollars) are deflated for comparability by the consumer price index, weighted to per-capita levels, and transformed into the natural log. Sources: Bureau of Labor Statistics (consumer price index) and Census of Governments (grants) 1982, 1992, 2002, 2012	10.808 (4.106)
State general grants	State general grants to a municipality. The grants (in historical dollars) are deflated for comparability by the consumer price index, weighted to per-capita levels, and transformed into the natural log. Sources: Bureau of Labor Statistics (consumer price index) and Census of Governments (grants) 1982, 1992, 2002, 2012	8.970 (5.265)
Controls
Federal grants	Federal grants to a municipality. The grants (in historical dollars) are deflated for comparability by the consumer price index, weighted to per-capita levels, and transformed into the natural log. Sources: Bureau of Labor Statistics (consumer price index) and Census of Governments (aid) 1982, 1992, 2002, 2012	5.804 (5.931)
State centralisation	State expenditure as a percentage of total state and local expenditures. A lower percentage indicates lower centralisation; a higher percentage indicates higher centralisation of the state and local government sector. Sources: Census of Governments 1982, 1992, 2002, 2012	0.454 (0.068)
Special districts	Number of special districts in the metropolitan area, weighted to per-capita levels and transformed into the natural log. Sources: Census of Governments 1982, 1992, 2002, 2012	4.409 (0.997)
Population	Municipality population, transformed into the natural log. Sources: Census of Population 1980, 1990, 2000, 2010	7.827 (1.811)
Population²	Square of the preceding variable	64.548 (29.594)
Aged under 18	Fraction of the municipality population aged under 18 years. Sources: Census of Population 1980, 1990, 2000, 2010	0.261 (0.058)
Aged 65 and over	Fraction of the municipality population aged 65 years and over. Sources: Census of Population 1980, 1990, 2000, 2010	0.143 (0.064)
Median income	Median household income in a municipality. The income (in historical dollars) is deflated for comparability by the consumer price index of the Bureau of Labor Statistics and transformed into the natural log. Sources: Bureau of Labor Statistics (consumer price index), Census of Population 1980, 1990, 2000, and American Community Survey 2008–2012 (income) estimate	9.994 (0.395)
Income heterogeneity	Ratio of mean to median household income in the municipality. Please see Alesina et al. (1999) for additional discussion regarding this ratio. Sources: Census of Population 1980, 1990, 2000, and American Community Survey 2008–2012 estimate	1.220 (0.176)
Racial heterogeneity	Probability that two residents, when randomly drawn from the municipality population, will belong to different racial groups. More formally, $probability = 1 - \sum_{r} R^{2}$ . In the formula, $R$ is the percentage of the municipality population that belongs to racial group r. This Herfindahl index incorporates information from each of the racial groups reported by the Census. Please see Jimenez (2014) for literature employing this index. Sources: Census of Population 1980, 1990, 2000, 2010	0.166 (0.168)
Panel controls
Time effects	Three sets of dummy variables classifying observations by time: thus 1982 observations take the score of 1 and zero otherwise, 1992 observations take the score 1 and zero otherwise, 2002 observations take the score of 1 and zero otherwise, and 2012 observations take the score of 1 and zero otherwise
Fixed effects	Fifty sets of dummy variables classifying municipalities by state: thus Alabama municipalities take the score of 1 and zero otherwise, Alaska municipalities take the score of 1 and zero otherwise, and so forth

Note: The data are assembled as follows: 1982 Census of Governments with the 1980 Census of Population, 1992 Census of Governments with the 1990 Census of Population, 2002 Census of Governments with the 2000 Census of Population, and 2012 Census of Governments with the 2010 Census of Population. Data from other sources are assembled as well to their corresponding time set. Unless noted otherwise, the unit of observation is a municipality. All variables are time-variant.

Dependent variable

The outcome of interest is operationalised via measures of functional size and functional breadth for municipalities. These measures provide a comparative snapshot of the presence of municipal government across states. To evaluate their reliability, the findings will be compared across those alternative measurements. For these purposes, functional expenditure data for municipalities are collected from the COG of 1982, 1992, 2002, and 2012.

The first dependent variable measures the size of services; the second dependent variable specifically measures the breadth of service responsibilities, using function-by-function data. While the functional size variable is a baseline measure, the functional breadth variable captures the breadth of responsibilities. Functional breadth, operationalised as an entropy index, uses information on the number of functions and the functional allocation of expenditure. This variable thus accounts for whether a municipality is responsible for a function and the extent of resources allocated toward that functional responsibility. The number of functions and their level of expenditure are accounted for – since a municipality may have a ‘functional responsibility’ but allocate no resources to that function (see, for additional discussion, Clark et al., 1982; Wiersema and Bowen, 2008).

The panels in Figure 1 plot the empirical distribution of the dependent variables. Panels A and B show the distribution of the functional size variable; panels C and D show the distribution of the functional breadth variable for municipalities in 1982 and 2012. In the panels, the dotted line represents the average (mean) of the variables in those years. The distribution of the functional size variable is approximately symmetrical, although much of the distribution is clustered around the mean. The distribution of the functional breadth variable shows a relative, positive shift in the functional responsibilities of municipalities from 1982 to 2012. The two dependent variables, although related, reflect alternative dimensions of the concept of interest.

Figure 1.

Empirical distributions of the functional roles of municipal government.

Independent and control variables

Data for independent and control variables are assembled from multiple sources. Data for municipalities’years of incorporation and their square are collected from the 1987 COG and then updated for new municipalities by the Boundary and Annexation Surveys from 1988 to 2012. The squared term tests for a steadying effect of years of incorporation. Data for municipal jurisdictions, municipal disparities, interlocal cooperation, state categorical grants, and state general grants are collected from the COG.

Control variables include federal grants, state centralisation, and special districts, as these factors may influence the functional breadth of municipalities (Bowman and Kearney, 2017; Foster, 1997; Stephens and Wikstrom, 2007). Data for these variables are collected from the COG. Additional variables control for demographic characteristics underlying the demand for services: population and its square, fraction of residents aged under 18 years, fraction of residents aged 65 and over, median income, income heterogeneity, and racial heterogeneity (Alesina et al., 1999; Jimenez, 2014). Data for these variables are collected from the Census of Population of 1980, 1990, 2000, and 2010, and the 2008–2012 American Community Survey estimate for income.

Pooled time-series analysis

The reported data allow for the testing of hypotheses through a pooled time-series analysis. The baseline model controls for fixed effects and time effects. Fixed and time effects account for (unobserved) state-level and time-specific factors. The significance of fixed effects and of time effects, as relevant controls, are reported within the results. Baseline results are first estimated by pooled OLS.

Analysis of quantiles

OLS relies on an assumption of linear, uniform effects of the independent variables. To test that assumption, quantile analysis will be employed in alternative models, observing municipal units on a different scope of functional responsibilities. A method of growing usage in the social sciences, quantile analysis provides some advantages. First, as compared with OLS, quantile analysis may be more resilient to extreme observations (outliers) (Wooldridge, 2010). Second, and centrally for present purposes, pooled quantile analysis will estimate an independent variable’s differential effect on different quantiles of the dependent variable.

In alternative models, the dependent variable’s 25th, 50th, and 75th quantiles are modelled to test for differential effects of the independent variables. To interpret those effects, municipal governments may be categorised as functionally limited, median, and broad municipalities (Anderson, 2014; Liebert, 1976). Limited municipalities represent municipal governments that have limited functional responsibilities. Median municipalities represent municipal governments that have typical functional responsibilities, and most municipal governments would fall in this range. Broad municipalities represent municipal governments that have extensive functional responsibilities.

Though focusing on specific quantiles, quantile analysis employs the full distribution of the dependent variable. A quantile regression uses all the information available in the dependent variable, while generating differential effects for specific quantiles. This is computationally accomplished by using an asymmetrically weighted function, every time a regression is computed for each of the dependent variable’s quantiles (Wooldridge, 2010).

Results

This section presents the research findings, focusing on the baseline model. Table 2 presents results for functional size and functional breadth, to allow for their comparability across those dependent variables. Although both variables yield similar results, the findings are discussed primarily in terms of functional breadth. I focus on functional breadth (for interpretation purposes) because this variable specifically represents the outcome of interest.

Table 2.

What factors affect municipal functional responsibilities?

Dependent variable:	Functional size	Functional breadth
Model:	(1)	(2)
Years of incorporation	0.434**(0.178)	0.737**(0.142)
Years of incorporation²	−0.122*(0.021)	−0.278**(0.074)
Municipal jurisdictions	−0.042**(0.028)	−0.027(0.022)
Municipal disparities	−0.026**(0.158)	−0.033**(0.005)
Interlocal cooperation	0.018**(0.002)	0.017**(0.003)
State categorical grants	0.110**(0.006)	0.088**(0.013)
State general grants	0.044**(0.004)	0.039**(0.009)
Federal grants	0.026**(0.002)	0.005(0.002)
State centralisation	−0.082(0.663)	−0.044(0.069)
Special districts	0.005(0.014)	0.038(0.027)
Population	0.621**(0.108)	1.501**(0.125)
Population²	−0.254**(0.006)	−0.395**(0.053)
Aged under 18	−0.048**(0.243)	−0.008(0.016)
Aged 65 and over	0.027**(0.295)	0.010(0.007)
Median income	0.337**(0.047)	−0.092(0.074)
Income heterogeneity	0.109**(0.095)	0.001(0.013)
Racial heterogeneity	0.007**(0.088)	−0.004(0.003)
Time effects	[0.000]	[0.001]
Fixed effects	[0.000]	[0.000]
Adjusted R²	0.401	0.536

Note: The table reports average marginal effects from pooled OLS. Standard errors clustered by state are reported in parenthesis. The p-value from an F-test is reported for the joint significance of time effects and fixed effects in brackets. N includes 30,728 municipality-years. *p > .10; **p > .5.

In general, the independent variables of interest appear to be significant. To interpret their substantive effect, the tables report average marginal effects of the independent variables. When positive, a marginal effect represents the percentage increase in the dependent variable as an independent variable increases by 1%. When negative, a marginal effect represents the percentage decrease in the dependent variable as an independent variable increases by 1%. To evaluate statistical significance, standard errors are estimated by clustering observations into states (Wooldridge, 2010).

Main results

As years of incorporation increase, the functional breadth of municipalities increases as well (Hypothesis 1). Years of incorporation are significant with a confidence level above 95%. In substantive terms, as years of incorporation increase by 1%, functional breadth increases by 0.737%. At the same time, the square of years of incorporation has an inverse relationship with functional breadth of (−)0.278. These results imply that years of incorporation have a positive yet gradually steadying effect.

As the number of municipalities increases, their functional breadth decreases (Hypothesis 2a). This effect, however, does not seem to be significant at conventional levels. As fiscal disparities between municipalities increase, their functional breadth decreases (Hypothesis 2b). Fiscal disparities are significant with a confidence level above 95%. In substantive terms, as fiscal disparities increase by 1%, functional breadth decreases by (−)0.033%.

As the level of interlocal transfers increases, the functional breadth of municipalities increases as well (Hypothesis 3). The level of interlocal transfers is significant with a confidence level above 95%. In substantive terms, as interlocal transfers increase by 1%, functional breadth increases by 0.017%. As state categorical grants increase, functional breadth increases as well (Hypothesis 4a). Categorical grants are significant with a confidence level above 95%. In substantive terms, as the amount of categorical grants increases by 1%, functional breadth increases by 0.088%. As general grants increase, the functional breadth of municipalities increases as well (Hypothesis 4b). General grants are significant with a confidence level above 95%. In substantive terms, as the amount of general grants increases by 1%, functional breadth increases by 0.039%. Of the intergovernmental factors, categorical grants have the strongest impact.

Robustness to alternative models

This section employs alternative models to check whether the baseline findings are robust to model respecifications. Table 3 reports results for the 25th, 50th and 75th quantiles, estimating whether the independent variables have a differential influence on functionally limited, median, and broad municipalities. After these model extensions are implemented, some variables appear to have uniform effects, whereas other variables appear to have differential effects.

Table 3.

Robustness to alternative models.

Dependent variable:	Functional size			Functional breadth
Quantile:	25th	50th	75th	25th	50th	75th
Roles of government:	limited	median	broad	limited	median	broad
Model:	(3)	(4)	(5)	(6)	(7)	(8)
Years of incorporation	0.673** (0.176)	0.228**(0.076)	0.053(0.082)	1.550** (0.430)	0.915**(0.205)	0.461**(0.079)
Years of incorporation²	−0.218**(0.091)	−0.015(0.042)	0.055(0.044)	−0.658**(0.218)	−0.372**(0.104)	−0.163**(0.044)
Municipal jurisdictions	−0.026(0.018)	−0.035**(0.016)	−0.034(0.022)	−0.046(0.038)	−0.029(0.021)	−0.016(0.017)
Municipal disparities	0.024** (0.004)	−0.019**(0.003)	−0.015**(0.005)	−0.045** (0.007)	−0.033**(0.006)	−0.023**(0.005)
Interlocal cooperation	0.015**(0.002)	0.013**(0.001)	0.013**(0.001)	0.020**(0.005)	0.013**(0.003)	0.010**(0.002)
State categorical grants	0.118** (0.019)	0.078**(0.010)	0.066**(0.008)	0.117** (0.023)	0.071**(0.013)	0.049**(0.009)
State general grants	0.035**(0.007)	0.026**(0.006)	0.021**(0.006)	0.053**(0.013)	0.023**(0.009)	0.012*(0.007)
p-value from F-test
Controls	[0.000]	[0.000]	[0.000]	[0.000]	[0.000]	[0.000]
Time effects	[0.000]	[0.000]	[0.000]	[0.000]	[0.000]	[0.005]
Fixed effects	[0.000]	[0.000]	[0.000]	[0.000]	[0.000]	[0.000]
Pseudo R²	0.387	0.392	0.367	0.532	0.533	0.526

Note: The table reports average marginal effects from pooled quantile regressions. Standard errors clustered by state are reported in parenthesis. The p-value from an F-test is reported for the joint significance of controls, time effects, and fixed effects. N includes 30,728 municipality-years. Bold results are examples of differential effects. **p < 0.05; and *p < 0.10.

Years of incorporation are generally significant. The dependent variables have a positive association with years of incorporation and an inverse association with their square. These results imply that functional responsibilities increase with longevity, as hypothesised, but this effect gradually levels off on older governments. This effect is more significant on the functional breadth variable. The number of municipalities in a region has negative effects across models, though not significantly at conventional levels. Fiscal disparities have a significant effect on both dependent variables. As fiscal disparities between municipalities increase, their functional size and breadth decrease across models. The alternative models lend additional support to the hypotheses of municipal longevity and disparities between municipalities.

Instruments of intergovernmental management seem to have differential effects on functional responsibilities. The level of interlocal cooperation is significant across models. In contrast, state grants appear to have a more pronounced effect on functionally limited municipalities. Both categorical grants and general grants have a stronger effect on the dependent variable’s 25th quantile. Regarding their substantive effect, categorical grants appear to have a more pronounced impact. As hypothesised, the impact of categorical grants may reflect their larger size in state assistance or their influence in broadening the range of municipal functions, or both mechanisms.

Table 3 illustrates differential effects in bold, focusing on years of incorporation, fiscal disparities, and categorical grants. Those independent variables, while generally significant, have a substantively greater impact on the dependent variable’s 25th quantile. Those factors thus appear to be particularly influential on functionally limited municipalities. Municipal longevity, fiscal disparities, and categorical grants would make more of a difference among municipalities whose functional breadth is modest.

Time effects and fixed effects control for unobserved factors in panel data. These controls should be jointly assessed (Wooldridge, 2010). Tables 2 and 3 report p-values for their F-tests of significance, showing that time and fixed effects are relevant controls. Fixed effects capture differences in average functional responsibilities of municipalities between states. Those effects are significant across models with a confidence level above 99%. The relevance of fixed effects is intuitive; since the states affect the functional responsibilities of municipalities in multiple ways, the fixed effects account significantly for state-level differentiation. While fixed effects control for persistent differences between states, time effects are useful to allow unobserved factors to vary over time.

Discussion

This research explores factors affecting differences in the functional responsibility of municipal governments, focusing on intergovernmental interaction in metropolitan areas. It analyses, from a local public economies perspective, instruments of intergovernmental management proposed in light of metropolitan fragmentation. The findings indicate that both regional contexts and intergovernmental mechanisms are relevant for explaining the functional breadth of municipal governments. The presence of multiple municipalities allows for alternative arrangements for the provision of services, although service disparities are prevalent across regions. The findings suggest, however, that regional fragmentation could be sustained whenever instruments of intergovernmental management are also available. Interlocal cooperation and state programmes of assistance can, in part, redress differences in the functional responsibilities of municipalities.

Metropolitan areas of the USA offer a range of experimentation in mechanisms for service responsibilities. Consider the Twin Cities and St Louis regions, two metropolitan areas illustrating some of the research arguments. The greater St Louis region is one example associated with the fragmentation of municipalities and their service functionality in a metropolitan area (Gordon, 2009). This region is home to a multiplicity of municipalities whose capacity and responsibility for services vary widely; both fiscal disparities and fragmentation of municipalities appear to affect their functional responsibilities. The City of East St Louis recently considered reorganisation to deal with its inability to meet service commitments (Anderson, 2014). The City of Ferguson, because of limited fiscal capacity, has relied on inequitable systems of financing (Sances and You, 2017). The regional fragmentation of governments seems to reinforce differences in their capacity to deliver services.

In the Twin Cities region, municipalities have used intergovernmental mechanisms to address regional disparities. They have been able to support the accessibility of services, in part by means of interlocal cooperation. Under a Fiscal Disparities Program, affluent municipalities transfer resources to fiscally distressed municipalities (Orfield and Luce, 2010). Intended for fiscal equalisation, systems of tax-base sharing have been linked to products of regional economic development. The programme also allows for alternative systems of service provision; interlocal cooperation is in place in a range of functional areas, such as land use, economic development, and transportation. These cooperative mechanisms mitigate, to a certain extent, the effect of fiscal disparities on the services provided by municipalities in the region (Parks and Oakerson, 2000).

Though interlocal cooperation admittedly is not a panacea, outcomes of the Twin Cities’ Fiscal Disparities Program suggest that fiscal and service cooperation can be instrumental in moderating serious gaps in functional responsibilities. Whether similar programmes are replicable elsewhere, to be sure, remains a proposition to be investigated. But, since responses to fragmentation are typically not feasible by consolidation of governments, intergovernmental management still offers practical methodologies for addressing differences in functional responsibilities. Recently, cooperative programmes are being discussed in the St Louis region (Ferguson Commission, 2015). In these discussions, local governments are exploring programmes of cooperation or assistance that may work in the context of the St Louis communities.

Some implications can be derived for theory and policy analysis about the functional breadth of governments in city-regions, more globally considered. One lesson involves the distinct roles of state–local and interlocal instruments in moderating the impact of fiscal disparities. While the responsibilities of municipalities can be supported by either interlocal cooperation or assistance from the central government, substantial gaps in service capacity seem to call for central government intervention. The American experience yields those various insights for a comparative analysis of the functional breadth of governments in city-regions, from a more global perspective (Deas and Lord, 2006; Wolman, 2008).

As an analytical framework, local public economies may be useful for the study of specific services. Consider public safety. Like other local functions, public safety services are shaped by the regional and intergovernmental contexts of metropolitan areas. Fiscal disparities affect municipalities’ ability to deliver public safety services of comparable quality across communities. If interlocal cooperation or state assistance is available, greater equality in resources can be attained for public safety, emergency services, and related functions of municipalities. The perspective of local public economies provides useful elements for explaining differences in the provision of services and alternative mechanisms for supporting those responsibilities of municipal government.

The approach used in this research has limitations. Local public economies research, as originally proposed, concentrates on the benefits of functional specialisation. It highlights the capacity of governments to tailor services according to the preferences of diverse populations in metropolitan areas. A subsequent agenda of research would involve inter-sectoral actors in the provision of urban services, as inter-sectoral service delivery can be an effective lever in functions that require both regional capacity and consideration of heterogeneous resident preferences for services. Accordingly, the involvement of non-governmental sectors in urban service provision is a promising area for future research (Stein, 1990). Another area for specific study is the role of political institutions, such as the form of government, in the functional capacity of municipal governments (Frederickson et al., 2015; Wheeland et al., 2014).

Furthermore, alternative disciplinary epistemologies can be explored regarding the functional responsibilities of governments in city-regions (see, for references, Brenner, 2004; Davies and Imbroscio, 2009; Deas and Lord, 2006; Goldsmith, 2001). Those alternative epistemologies will be useful, as they offer distinct analytical emphases about the scope of governmental authority in globalising regions. Finally, citizens’ trust in government may be explored, relating to the public support for municipal government (Fledderus et al., 2014; Piotrowski and Van Ryzin, 2007). Work on these areas will broaden knowledge around the functional responsibilities of municipal government in metropolitan areas.

Footnotes

Acknowledgements

The author is grateful to Cali Curley, the editors, and three anonymous referees for detailed feedback and to Asmita Patel for research assistance.

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This research was supported by the University of New Mexico Research Allocations Committee and the Paul A Volcker Junior Scholar Grant from the American Political Science Association Section for Public Administration.

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