CLOSUP survey: State funding incentives foster collaboration but also raise concerns

A new policy in Michigan that encourages local governments to collaborate and combine operations appears to be working, but it also carries a risk of producing unintended consequences, a new survey by the University of Michigan reports.

For years, many local governments in Michigan received state funding in the form of statutory revenue sharing. But in 2011, Gov. Rick Snyder and the state legislature made major policy changes that eliminated the revenue sharing and created the "Economic Vitality Incentive Program."

The new program offers incentive payments to a reduced number of local governments, and the funding is based on how well they fulfill requirements in different categories, such as consolidation of services.

Even before the reforms were introduced, 72 percent of all local jurisdictions were already collaborating with other jurisdictions to jointly provide services, according to the University of Michigan survey. Among the jurisdictions that are now eligible for the incentive funds, 87 percent were already collaborating with others to provide services jointly.

Despite those high levels of existing collaboration, the new incentives appear to have fostered more plans for new or expanded collaboration, according to the poll by U-M's Ford School of Public Policy. Among the local governments that weren't exploring increased collaboration before the incentives were announced, about 88 percent eventually changed their minds, or "flipped," and did submit plans in 2011 for new or expanded cooperation, the survey says.

But local officials expressed many concerns about the program. Some said that the state funding wasn't enough to cover the extra work required for expanding collaborations. Others complained it's difficult to find nearby partners for collaborations that make sense. Some experienced logistical problems.

The study cautions that state policymakers should be aware that tying revenue sharing to the expansion of collaborations may lead to unintended consequences such as the dissolution of existing collaborations in order to launch new ones, decreasing trust between local jurisdictions, or the creation of partnerships that don't make financial sense on their own.

The Michigan Public Policy Survey was done by the Ford School's Center for Local, State, and Urban Policy. It was conducted from Oct. 3 to Nov. 23, 2011, and involved online and hard-copy surveys sent to the top elected and appointed officials in all counties, cities, villages and townships in Michigan. A total of 1,331 jurisdictions returned valid surveys, resulting in a 72 percent response rate. The margin of error was plus or minus 1.43 percentage points.

The report is available at http://closup.umich.edu.