Fiscal Coordination Between Governments

Why is fiscal co-ordination between different tiers of government difficult to achieve? How might these difficulties be resolved?

Coordination is a difficult objective to achieve in any organization, more so in political organizations, and more so in multiple tiers of political organizations. In this paper we will look at the difficulties of fiscal coordination between tiers of government and how these might be resolved, using the local municipality of Dalton Township, Michigan, USA as an example.

Coordination can be defined as "the process of organizing the different activities or people involved in something so that they work together effectively." (Cambridge Dictionary, 2022) To a large extent politics is the opposite of this, resolving conflicts arising from disparate interests among persons through means and methods of power. It can be stated that, "In fact, if coordination is the means by which organizations find order and integration, then politics acts to the detriment of coordination, by disordering and disintegrating what currently exists." (Mintzberg, 1989, pg 236) Government without politics is probably impossible, so there is a significant difficulty with coordination in governmental systems.

There are three general ways for political institutions to be sustainable: a preponderance of shared underlying values, ideology, and beliefs; pre-commitment to a system of checks and balances; or the buying off of potentially viable dissidents. (Bird and Ebel, 2007, pg 18-19) These are important and come into play whether in a unitary, federal, or confederate system of governance, whether it is centralized or decentralized.

Let's look at how Dalton Township fiscally coordinates and interacts with five tiers of other governments. The township has 9,427 residents as of the last census. Around 1,300 of those live in The Village of Lakewood Club in the north-western corner. The village has its own elected council and its own tax millage. The main thing that the township does for the village is to run elections. There is no fiscal coordination on this as it is a wholly township responsibility. Currently the township and village are negotiating a contract for zoning administration services. Contracts are one way of working on resolving difficulties of fiscal coordination.

The township also has contracts, intergovernmental agreements, and memorandums of understanding with boards, committees, and commissions that involve other townships and cities, along with the county. For our purposes townships and cities operate at the same level. As township supervisor I sit on three such boards: The Water System Policy Board, The Wastewater Management Committee, and the Berry Junction Trail Commission. Having an organization with a separate legal agreement and structure in place allows these operations to continue through turnover in elected offices, and therefore helps in the coordination of the ongoing fiscal responsibilities associated with these functions.

The township collects taxes that are then distributed to the county, the state, school districts, etc. A millage tax was passed in Muskegon County for senior services. Part of this is done directly through the county, part of it is distributed back to the township to be used for certain approved purposes. This type of limited approved use is commonly used by higher governments when distributing funds to lower governments.

Around half of Dalton Township's budget comes through state revenue sharing, which is included in the state constitution. Certain duties are mandated by the state to the township, such as the assessing of property, the collection of taxes, the running of elections, etc. There are various regulations on the use, but to a large extent this money, along with the property tax money collected by the township from the citizens, is at the discretion of the township board.

Currently the township is in a few year process to allocate federal funds known as ARPA. This was distributed from the federal government to the state and from the state to the township. It was passed without rules being in place, then there were very strict rules on usage, and now there are very loose rules. 

With political disagreements operating at every level of what we've just gone over, and in every organization at every level, it's easy to see why coordination is difficult in such a system. For instance, the township board is considering a new roof on the township hall. The current roof is in rough shape. Because it's a higher ticket item I collected a few quotes over the summer months, as is stated in the purchasing policy of the township. However, when I brought the proposal to the board it didn't get approved. We're nearing winter. Now the trustees that were hesitant about the project before want to get it done soon, which means I'll bring it before the board again next month for a vote. However, I can't count on it passing, and if it does I can't count on the timeframe. Therefore, I've hired a roofing company to do one or two thousand dollars worth of repairs with the goal of that being enough to get the roof through the winter if that is what occurs. But, the full roof project may get approved, meaning that this long process would also include a direct waste of one or two thousand dollars. A good example of government inefficiency. But, the checks and balances that create that inefficiency are still desirable to limit the consolidation of power. This is an example of just one thing at just one tier of government, the extrapolated complexity through multiple tiers is immense.

Fiscal coordination through tiers of government is complex and difficult because of the nature of politics itself. On the grand scale shared values and pre-commitment to the systems of decision making and authority can help, while contracts and other agreements can support the legal and logistic coordination of resources across agencies and administrations.

Reference List

Bird, Richard M & Ebel, Robert D (2007) Chapter 1 ‘Subsidiarity, solidarity and asymmetry: Aspects of the problem’. In: Bird & Ebel (Eds.) Fiscal Fragmentation in Decentralized Countries: Subsidiarity, Solidarity and Asymmetry. Cheltenham UK: Edward Elgar.

Cambridge Dictionary (2022) "coordination" accessed on 11 October 2022 at https://dictionary.cambridge.org/us/dictionary/english/coordination

Mintzberg, Henry (1989) Mintzberg on Management. New York, NY, USA: The Free Press

________________________________________________

Find more at JeffThinks.com or JeffreyAlexanderMartin.com