Abstract
Despite the significant contributions of cities to our nation’s economy and the everyday life of most Americans, local government leaders are faced with significant constraints on their ability to lead and govern. This article presents a novel framework of constraints facing city leadership focused on legal (what they are allowed to do), fiscal (what they have resources to do), and political constraints (what they want to do). A model is constructed to analyze the impact of these constraints on local action regarding minimum wage and hypothesize that greater constraints will result in less policy action within cities. Using multivariate regression, the authors find that political constraints and economic factors are the most significant determinants of whether a city pursues policy leadership.
Because of their limited geographies dense with human potential, cities accelerate the spread of ideas. They have become the drivers of our national economy. Some of this success is due to cities’ comparatively minimal bureaucracy, which allows them to respond more quickly to technological and economic changes than their state or federal counterparts and, in many instances, to act more pragmatically. At the same time cities are innovating, they are providing a breadth of essential services to residents. Historian Kenneth Jackson once wrote, “Local governments in the United States have more responsibilities than municipal jurisdictions in other nations, and thus, they must themselves provide and pay for schools, policemen, fire protection, road repairs, sanitation, and social services.”
Despite their role in our country, cities are faced with a lack of constitutional power. While many cities, towns, and villages predate the United States, there is no mention of local governments in the U.S. Constitution or even the Federalist Papers. The ability of cities to formally exert leadership by way of regulatory action or policy-making, including funding their own activities, regulating wages, and prohibiting discrimination, is determined by state governments. Hence, cities are creatures of their states with highly uneven powers from state to state.
Infringements on local control have resulted in considerable challenges for cities in recent years, particularly as federal and many state governments have left leadership vacuums in policy areas that significantly impact cities including minimum wage, climate change, and immigration. For example, the federal government has not established a firm comprehensive immigration strategy including securing borders, providing a path to citizenship, or educating those who immigrated as children. Many cities have stepped into the void, declaring themselves sanctuary, or welcoming, cities. This means that they offer city identifications, educational opportunities, community policing, and other strategies to keep their communities safe and prosperous, while integrating undocumented immigrants where they live and contribute to the local economy. 1 These local actions have met with resistance from the federal and some state governments, but alternative paths have not been put forth. Leadership vacuums like this at higher levels of government, together with significant constraints on local governments, circumscribe the ability of many cities to realize their full potential for their residents and for the nation.
This article explores the constraints on local policy leadership to enact progressive policy, and why some cities are able to respond to the needs and values of their constituency even within significant constraints. For the purpose of analyzing how power is limited, the constraints on policy leadership are divided into three categories: legal (what they are allowed to do), fiscal (what they have resources to do), and political (what they want to do). For local governments like cities, these constraints vary in particulars but are largely defined at the state level. A model is constructed to analyze the impact of these constraints on local action regarding minimum wage as a particular example and hypothesize that greater constraints will result in less policy action within cities. Using multivariate regression, political constraints and economic factors are found to be the most significant determinants of whether a city pursues policy leadership in the form of a minimum wage ordinance. In what follows, this article describes local policy leadership constraints in more detail, presents the methodology and results, and concludes with recommendations.
Legal Constraints
The U.S. Constitution does not mention local governments. Instead, the Tenth Amendment reserves authority-giving powers to the states. Therefore, there is a great deal of diversity in state–local relations between, as well as within, states. Generally speaking, however, states provide either narrow (Dillon’s rule) or broad (home rule) governing authority to cities, defined in the state constitution and/or by statute enacted by the legislature (DuPuis et al. 2017). Thirty-nine states employ Dillon’s Rule to define the power of local governments, with thirty-one states applying the rule to all municipalities and eight states (such as California, Illinois, and Tennessee) to only certain municipalities (Richardson, Gough, and Puentes 2003).
Within this context, a major threat to city authority is state preemption. Preemption is the use of state law to nullify a municipal ordinance or authority. State preemption can span many policy areas including environmental regulation, firearm use, and labor laws. States can preempt cities from legislating on particular issues by either statutory or constitutional law. In some cases, court rulings have forced cities to roll back ordinances already in place. State legislatures have gotten more aggressive in their use of preemption in recent years. Explanations for this increase include lobbying efforts by special interests, spatial sorting of political preferences, and single-party dominance in most state governments.
Proponents of preemption argue that it equalizes laws across the state, avoiding an unnecessary patchwork of regulation. Preemption has spillover effects, though, because it reduces local control. These restrictions prevent cities from crafting laws that fit their needs. Recent preemption has pitted rural- and suburban-dominated state legislatures against cities with large populations of low-wage earners and ethnic minorities. In these cases, the argument for preemption has focused on the role of government and cities’ place within it.
The National League of Cities (NLC) recently conducted a study of state preemption in seven different policy areas, ranging from labor regulation to taxing authority (DuPuis et al. 2017). Our analysis finds extensive variation in the number of preemptions and the application of these laws across states. Only two states, Connecticut and Vermont, do not preempt their cities in any of the policy areas examined. Specifically on minimum wage, there have been rising levels of scrutiny in recent years over whether the current minimum wage is a “living wage.” Movements to increase wages to US$10.10 per hour, or even US$15 in some places, spread throughout city councils and ballot boxes. However, not all cities were able to give their residents a pay raise due to state preemption. And, in a number of states, legislatures made sure even more cities could not regulate wages by passing new preemption laws. Local governments can be preempted from passing minimum wage ordinances in a number of ways including their state constitutions, their particular charters, or specific statutes passed by the legislature. Those in favor of state preemption can also take cases to the courts.
Twenty-five states currently have some kind of preemption of minimum wage ordinances. Many of these states, such as New Hampshire and Colorado, have had long-standing preemption because authority to regulate wages was never granted to cities. Moreover, a growing number of state legislatures have considered explicit statutory preemption. Alabama, Ohio, and North Carolina are three states that took action in 2016. Alabama’s bill bore a striking resemblance to “The Living Wage Mandate Preemption Act,” a piece of model legislation posted on the website of the American Legislative Exchange Council (see American Legislative Exchange Council 2013).
This analysis hypothesizes that cities with greater legal constraints will be less likely to exert policy leadership. For example, if cities are either denied access to regulate wages due to Dillion’s Rule, or if the state explicitly preempts cities’ ability to regulate wages, they will be less likely to have a local minimum wage ordinance.
Fiscal Constraints
In addition to legal constraints, cities are constrained in terms of the fiscal resources available to them to pursue policy goals. Constraints on city fiscal capacity can be operationalized in a number of ways, or as a combination of several factors, including broader revenue and expenditure trends, access to own-source revenue raising tools and statutory, or voter-imposed limitations on the revenues collected from these tools.
For over thirty years, the National League of Cities has conducted the City Fiscal Conditions survey of city finance officers to assess broader fiscal health trends for the municipal sector (McFarland and Pagano 2017). The analysis indicates that city finances are somewhat constrained and are predicted to become even more so in the coming years. In fiscal year (FY) 2016, city General Fund revenues began to slow, from 3.3% in 2015 to 2.6% growth in 2016. Cities are forecasting further slowing in FY 2017. If these trends materialize, this will be the first time there are two consecutive years of slowing growth since the start of the Great Recession. Additionally, the research examines revenue recovery after each of the three most recent recessions (1990, 2001, and 2007) in terms of cumulative year over year change. For the most recent recession, revenues took nearly seven years to begin to recover and are still lagging prerecession levels. Comparatively, full revenue recovery following the 1990 recession only took five years, and following the 2001 recession, it took six years.
Although revenues are lagging, resident service expectations, as well as infrastructure, pension, and other needs are increasing. To meet these needs, cities rely largely on own-source revenues, including taxes and fees. Cities with a stronger mix of revenue sources are generally better able to buffer against economic downturns and to capture revenue growth during periods of economic expansion (Tannenwald 1999). However, cities typically only have access to one or two revenue streams, such as property and sales taxes (McFarland and Hoene 2015). Some states grant cities, notably larger cities, the authority to tax individual incomes or businesses. No state uniformly authorizes its municipalities to utilize all three tax sources.
Another significant local fiscal constraint is voter- or state-imposed (constitutional or statutory) tax and expenditure limitations. At the local level, the most common TELs affect local governments’ property taxes, while general revenue and spending limits are less common. Three types of property tax limits exist: those that seek to cap the property tax rate, those that seek to limit growth in local property assessments, and those that seek to limit the total levy (revenue) growth from property taxes from year to year. In NLC’s 2015 analysis of tax and expenditures limitations on municipalities, nine states were found to have no TELs (McFarland and Hoene 2015). Six states were found to have the most stringent TELs that had both a binding property tax limit and a general revenue limit. These include voter-backed initiatives like Proposition 13 in California and the Taxpayer Bill of Rights in Colorado.
Trends in cities’ ending balances are also indicative of their fiscal constraint. Ending balances, including those that are assigned for specific purposes and those that are unassigned, are maintained for many reasons. For example, bond underwriters look at reserves as an indicator of fiscal responsibility, which can increase credit ratings and decrease the costs of city debt, saving a city money in annual debt service costs. A city’s strategy to grow ending balances must also be weighed with potential forgone expenditures. In general, however, the growth of ending balances signals the recognition among cities that key tax revenues, along with state and federal aid, have become less reliable, and their desire for greater flexibility to respond to local needs and to be more prepared for future fiscal downturns (McFarland and Pagano 2016).
Fiscal constraints matter for local policy leadership. This analysis hypothesizes, as Pagano and Hoene (2016, p. 4) contended in Fiscal Policy Space, that “cities that are less fiscally constrained have greater room for city leaders to efficiently, effectively and fairly pursue their own pathways to make better communities.” For example, during the Great Recession, cities with less fiscal constraints, including greater access to tax sources, were less likely to cut spending on city programs and were able to maintain fund balances allowing them to maneuver when confronted with challenges.
Political Constraints
In addition to their legal and fiscal environments, city leaders operate within a political context at both the local and state levels that affect their capacity to pursue progressive policy leadership. For example, as preemption efforts often concern politically divisive issues, they rely on single-party dominance to pass through state legislatures. As of the 2016 election cycle, Republicans have twenty-five government trifectas, meaning they control both legislative chambers and the governor’s office. Democrats have trifectas in six states but control a larger portion of city halls. Several states where there has been single-party control over the last decade, notably those that are primarily Republican, including Georgia, Michigan, North Carolina, Ohio, and Wisconsin, have seen increases in preemption against progressive city action. Indeed, Riverstone-Newell (2017) found that rising conservative dominance of state legislatures has provided the opportunity to thwart progressive local policies, and these efforts have been aided by various industry and conservative organized groups. This analysis hypothesizes that cities in states that are more heavily Democratic at the state level have either the encouragement or cover that they need to pursue more progressive policy action at the local level.
Of course, city leaders initially pursue these local policy actions based on the policy preferences of their own constituents. One window into viewing local policy preferences is the political culture of local voters. According to Pagano and Hoene (2016, p. 28) in their study of local policy space, “Democratic tendencies are associated with more expansive fiscal policies and with allegiances to the public employees, the poor, and minorities, whereas Republican leanings are associated with fiscal conservativism, a presupposition again tax increases, and allegiance to a good business climate and business like efficiencies in a government.” This analysis hypothesizes that cities whose constituents are more heavily Democratic would support or mandate a more progressive local policy agenda, namely, on issues like minimum wage, climate, and immigration.
Predictors of Local Policy Leadership on Minimum Wage
To understand the driving factors behind a city’s efforts to take on policy leadership, a multivariate regression analysis is applied to determine the extent to which the legal, fiscal, and political constraints discussed above explained whether a city takes policy action. The model examines the relationship between these constraints and local minimum wage policy action.
Case Selection
This analysis examines 100 cities. The cities selected were the core cities of the 100 largest metropolitan areas in the United States based on Census 2016 estimates. This is the basis for NLC’s annual study of the fiscal health of the municipal sector. Compared to the more than 19,000 municipal corporations in the United States, these cities are much larger by population. As such, they tend to have greater authority granted to them by their states. With regard to those cities that have enacted a minimum wage, the majority are cities in California. This study captures some of those as well as almost all cities outside of California with a minimum wage above the state level.
Variables
In our analysis, the dependent variable was policy action on the issue of minimum wage. Minimum wage was measured on a scale from 0 to 2. Cities that did not have a minimum wage were assigned a 0. To earn a 1, cities must have done one of the two things: recently attempted to pass a citywide minimum wage but were unsuccessful or enforce an internal minimum wage for city employees and/or contractors. Only cities that had minimum wages beyond the state level that applied to all workers within their jurisdictions were assigned a 2. Of the 100 cities in our sample, 11 were assigned a 2, 8 were assigned a 1, and 72 were assigned a 0. The average score was .3.
The political constraint on cities was operationalized in two parts. One measure was the percentage of local votes for the Democratic candidate in the last presidential election. For this measure, county-level data were used because data on city-level voting are limited to the precinct level and therefore difficult to determine within municipal boundaries. Another measure was the partisan composition of the state legislature. State legislatures were scored on a continuous scale from 0 to 1. A score of 0 represented a Republican-controlled state government and 1 represented a Democratic-controlled one. Increments along this scale were determined based on the proportion of control of the houses of the state legislature and the governor’s office (i.e., if a governor’s office is Democratic and both houses of legislature are Republican-dominated, the city would receive a .33).
The legal constraint on cities was operationalized as state preemption of minimum wage ordinances. The data on preemption were derived from NLC’s earlier work on state preemption. It was measured as a binary variable as either a 0 for preempted or a 1 for not preempted. This variable was included over home rule because it is directly linked to the policy being tested. Additionally, home-rule status was found to have no significant explanatory value in earlier models.
Fiscal constraint is operationalized as a city’s unassigned general fund balance divided by its total general fund expenditures. A sizable balance is indicative of sound fiscal health. Better fiscal health allows local governments greater flexibility to respond to local needs and to implement new policies that have a cost to the city. A city’s personnel expenditures would increase as a result of a local government only or a citywide minimum wage policy.
As a demographic control, population was included to account for size and potential political structural differences among cities. Population data were gathered from the U.S. Census Bureau. An economic control measuring a city’s housing affordability as the rent-to-income ratio was also included. This variable was calculated by dividing the annualized median gross rent by the median household income, both statistics were gathered from the 2015 American Community Survey.
Results and Discussion
As a goodness-of-fit measure, our model generated an R 2 value of .424, meaning that the political, fiscal, and legal predictors moderately explained the variation of whether a city took policy action regarding minimum wage. Population, local presidential vote, state-level partisanship, and rent-to-income ratio (economic control) were all found to have a statistically significant relationship with minimum wage policy (see Table 1).
Regression Analysis of City Minimum Wage Policy.a
aAdjusted R 2 = .424.
Political factors, including state-level political party affiliations and political affiliations of the local population, were the most predictive of local minimum wage action. Those cities with a greater proportion of the local population who voted for the Democratic candidate in the 2016 election were more likely to have local governments that took action on minimum wage (standardized β coefficient of .369). Similarly, those cities in states with a greater proportion of Democratic state-level representation were more likely to have local governments that took action on minimum wage (standardized β coefficient of .355).
Legal factors, including state preemption of local minimum wage ordinances, were not predictive in our model. This is likely because although preemption places strict structural limits on the ability of cities to implement their own local minimum wage ordinance, city leaders are finding some ways within these constraints to support their communities. For example, although the city of Madison, WI, is preempted from enacting a citywide minimum wage ordinance, the city has instituted a minimum wage for city employees only, thereby improving wages for a portion of the city’s workers and putting pressure on the private sector to raise wages in order to compete for talent. Additionally, although minimum wage preemption is not statistically significant in the model, an earlier correlation analysis found that state preemption is highly correlated with political factors, including the partisanship of the state government, with Republican being linked with state preemption.
Fiscal constraints were not found to be a significant predictor of whether a city pursues action on local minimum wage. Although cities with a larger unassigned fund balance as a proportion of their expenditures have greater access to funds to respond to crises or meet resident’s service demands, the act of building up the fund balance may indicate that they are choosing not to or unable to expend financial resources at this time. For example, the city in our sample with the highest fund balance proportion (and therefore presumably least constrained) is Harrisburg, Pennsylvania. A sizable fund balance in this case is likely more indicative of significant fiscal restructuring following the city’s entrance into state receivership in 2011, rather than the city’s capacity to implement potentially costly local policies. Other measures of fiscal constraint, including revenue growth and service demand, may provide greater explanatory power; however, it may also be the case that for minimum wage action, in particular, fiscal factors are less constraining than for other types of policy actions.
On the rent-to-income ratio, one would expect to see that cities with less affordability would be more likely to raise the minimum wage to help their residents achieve greater financial security. Interestingly, the ratio of rent to income was found to have a significant but negative relationship with minimum wage, meaning cities that are more affordable to their residents (i.e., cities with a lower rent-to-income ratio) were more likely to pass an ordinance raising wages (standardized β coefficient of −.306). Although this seems counterintuitive, it is also indicative of the importance of the economic environment in which cities are operating and likely that our model is missing other important economic drivers of policy action. For example, Seattle, Washington, surprisingly has one of the lowest rent-to-income ratios meaning that, on average, the city is affordable to those who live there (Seattle also has a large percentage of high-wage earners). Seattle’s minimum wage is not necessarily a result of its affordability, but likely a result of having a strong economy that can both absorb the additional costs to the public and private sectors and a competitive economic environment that ensures businesses will stay in the city regardless of higher labor costs.
Future research on this subject can examine the impact of state-level policy action. For example, based on the variables included, our model predicted that Honolulu and Boston would take more progressive policy action on minimum wage. However, they did not. This is likely due to the fact their state minimum wages are well above the federal level at US$9.25 in Hawaii and US$11.00 in Massachusetts. The need for the cities to act was minimized by progressive policy action at the state level.
Additionally, some cities in our sample like Minneapolis and Albuquerque were found to be overperformers—cities for which our model would not have predicted minimum wage ordinances. Minneapolis enacted its minimum wage in 2017, where the Minnesota minimum wage was already US$9.50. Over seven years, the minimum wage will grow to US$15 for all employers. In Albuquerque, where the New Mexico state minimum wage is US$7.50, city residents voted in 2012 to increase the minimum wage to US$8.50 and index increases to inflation. More research on how cities are able to exercise policy leadership in the face of constraints would greatly add to the field.
Conclusion
Some of the most pressing national and global challenges of our time, from lack of affordability to immigration to climate change, are playing out intensely in our cities. 2 However, policy leadership at higher levels of government is often missing, contradictory, or outwardly antagonist to the explicit needs of local communities. By and large, local governments, those leading closest to the people, respond and shape policies based on their on-the-ground view of how government affects the lives of people. For example, when immigration is perceived at the local scale, the debate becomes less about who has a visa and more about the ability of cities to prevent and solve crimes by building trust between police and immigrant communities. With a local lens on climate change, the debate becomes less about the validity of science and more about preventing pervasive water crises, saving neighborhoods, and protecting food supplies. This local perspective on a whole range of national issues mandates solutions that make people’s lives better. Many state governments, however, are moving to formalize their objection to progressive policy leadership in cities.
Our analysis reveals that the most significant and predictive factor related to city progressive policy action is politics, both at the state and local levels. Cities with greater Democratic local population and greater Democratic state representation were more active on local minimum wage, and greater Republican affiliation was less active. This is reflective both of the rising conservative dominance of state legislatures, which has spawned many preemption efforts to thwart progressive local policies, and the responsiveness of city governments to local populace.
Looking to the future, an intergovernmental system that enables cities to respond to the needs and values of their constituents will lead to greater progress for the nation. Enabling bold policy leadership in cities could include more control over local decision-making, less state preemption, a seat at the table for major state and federal policy developments, and greater and more flexible own-source revenue options and intergovernmental aid. Although real change may not come without substantial shifts in politics, city leaders will continue to not only fill the policy gaps left by other levels of governments but also innovate within constraints in ways that push their communities forward.
Footnotes
Acknowledgments
The authors gratefully acknowledge the data collection efforts of Domenick Lasorsa, NLC research assistant, and Farhad Kaab Omeyr, a doctoral student in the Department of Public Administration at the University of Illinois at Chicago (UIC); the methodological insights of Anita Yadavalli, program director of City Fiscal Policy at NLC; and the fiscal constraints framing support by Michael A. Pagano, dean of the College of Urban Planning and Public Affairs and professor of public administration at UIC.
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.