Abstract
Home rule reduced control by the state legislature and gave municipalities the option of self-chartering and the ability to independently determine their desired structure and functions. Fiscal federalism theory suggests that decentralization of power is more likely when there is heterogeneity across local governments. The theory is empirically tested by considering municipal-level demand for home rule, measured by predicting a latent taste for home rule. The evidence indicates states that adopted constitutional home rule had stronger and more heterogeneous municipal-level preferences. This paper highlights the importance of considering both within and across state heterogeneity in the endogenous determination of institutions.
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Notes
Later in the 20th century, some states adopted statutory home rule instead of incorporating home rule into their state constitutions. Rhyne [1957] points out that where the constitution authorizes municipal corporations to adopt their own charters the powers are derived directly from the constitution, and not from the legislature. Statutory home rule provisions are statutes of the state legislature and subject to amendment or revocation. Thus, constitutional home rule provides municipalities with access to a more stable institutional arrangement, one less likely to be infringed upon by the state legislature and one more protected by the courts. From here on, the use of the term “home rule” implies constitutional home rule, not the later version of statutory home rule.
I want to emphasize the distinction between heterogeneity across governments and heterogeneity within a government. This paper identifies heterogeneity across municipalities within a state as motivation for policy decentralization [Oates 1972]. I will later consider how the degree of heterogeneity within municipalities may be related to the use of home rule charters.
Griffith [1974, pp. 126–128] used a previous study which had ranked 36 cities on various measures of functional achievements. Ranking the cities by quarter, Griffith found that of the cities in the top quarter, seven out of nine cities were home rule charter cities; of the nine cities in the bottom quarter, only one had a home rule charter. This terse comparison leads us to believe home rule had some effect on the performance of governments. More recently, Turnbull and Geon [2006] directly evaluate the impact of the institution of home rule on county government.
Weiner [1937, p. 561] uses World War I to mark a turning point in the history of home rule.
Krane et al. [2001] report that Nevada adopted home rule in 1924 and Arkansas in 1926. However, in Nevada the apparent constitutional grant of home rule was overruled when legislation was passed allowing the state legislature to create and change municipal charters. The cited home rule amendment in the 1926 Arkansas constitution is instead a limitation on municipal legislative and taxing power.
Kimball [1922, p. 376] refers to the classification by Goodnow and Bates in Municipal Government and to work by Dillon.
Oates [1988] notes that larger localities are likely to have a wider range of public goods and services.
There are alternative views which explain why size, growth, and infrastructure may affect the likelihood of adopting a home rule charter. For one, the growth of the modern business enterprise and the corresponding professionalization of private firm management sparked a parallel movement in the reform of municipal government. As firms reorganized internally for efficiency, leading professionals saw the same opportunity to reform government. The commission and council-manager forms of government were an application of successful structural business reforms, and were often accessible only by the use of a home rule charter. In addition, changing economic outcomes affected the demand for modern goods and services. People not only demanded different consumer goods, but also demanded improved public goods such as water, roads, public transportation, electricity, and parks. A municipality that wants to modernize its public services may choose to pursue a home rule charter in order to expand its governmental functions.
The original colonies and southern states are left out of the sample as these states have a very different history with respect to local government control, and thus the initial institutional setting is not comparable. For one, there was no home rule activity in these regions during this time period. In 1922, Pennsylvania adopted a home rule amendment, but the state legislature never enacted the necessary enabling legislation [CELDF 2009]. In 1936, West Virginia adopted home rule, followed by New York in 1938. No other state in the east or south adopted home rule until Rhode Island in 1951. In addition, states in the east and south have very distinct local government histories which make them inappropriate as comparison groups. States in the east are different from others in the Union by virtue of their colonial history. Local government legislation in the colonies was established piecemeal as the demand arose. Municipal charters were granted by the colonial governor and were often commercially oriented. At the time when the United States was founded, there were many municipal charters given by special decree as well as local government customs and procedures that were generally accepted practices. Thus, original constitutions in these states often remained silent on local governments and allowed for the continuation of established governance structures and corporations. Southern states had disperse populations which meant municipal governments were not as important as county governments.
The 12 states are: Missouri (1875), California (1879), Washington (1889), Minnesota (1896), Oregon (1906), Oklahoma (1907), Michigan (1909), Arizona (1912), Colorado (1912), Nebraska (1912), Ohio (1912), and Texas (1912).
The year of the first home rule charter was gathered from several types of sources. Sources used include the Secretary of State’s offices, the state’s League of Municipalities, city clerks from individual municipalities, government documents and academic articles.
Oregon home rule information was not available because their state office reported that all information was inaccessible. This information could be made available at a later date.
After the 1930s there were significant changes in the form of constitutional provisions for home rule.
Starting in 1870 and continuing until 1942, governmental data were published as Wealth, Debt, and Taxation. From 1942 to 1957, instead of a decennial census, annual data were collected on state and local governments. Starting in 1957, the current form of the Census of Governments was taken every five years.
Other would be equal to 1-percent Democrat-%Republican.
The analysis was also run on all cross-sectional data from 1902, 1913, 1922, and 1932. The 1902 results are similar to the 1890 cross-sectional results, while the 1913, 1922, and 1932 cross-sections are similar to the results using the panel data.
The use of local level variables is essential to predicting the use of home rule, as there does not seem to be a strong geographic component. When looking within a state, there does not seem to be a concentration of home rule in specific areas of the state.
The empirical analyses are limited to modeling the single transition to a home rule charter. I do not observe any municipalities that transition back to being a general legislation municipality, although there are cases of this happening in later time periods.
Gross debt is the sum of bonded and floating debt. From this total, the level of sinking fund assets is subtracted. A sinking fund is money set aside by a municipality to repay existing loans when they come due.
Note that % Republican is left out. For the late regression analysis, one of the three political parties has to be dropped because any one party is a linear combination of the other two parties.
This follows the method used by Strumpf and Oberholzer-Gee [2002, p. 17].
The three variables that I choose to include for this within-state measure of variance are population growth, percent native-born, and gross debt less sinking fund per capita.
The most commonly used distributions for adoption times are the Weibull and the exponential distributions [Temple 1996, p. 1009; Greene 2003, p. 794].
An incorrect distribution of the hazard function would result in biased results. While the non-monotonic raw hazard calls into question the choice of the Weibull distribution, it appears the introduction of covariates controls for aspects inducing the non-monotonicity and alleviates concerns about the use of the Weibull distribution.
Estimates of P, the duration dependence parameter, are always significantly different than 1. This rejects the use of the exponential distribution in favor of the Weibull distribution. Using the 1890 data, there is a significant negative duration dependence, while the panel data yields a positive duration dependence after controlling for the covariates. This is likely due to the non-random sample resulting in only large municipalities in the panel dataset.
Some researchers hesitate to use the semi-parametric model when there are tied ending times, an issue I have in my data as many municipalities adopt a home rule charter in the same year. Stata utilizes the exact partial method in handling ties. However, the method can produce incorrect calculations when risk pools are large and there are many ties [Cleves et al. 2003, p. 150].
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Acknowledgements
I would like to thank John Wallis, Wally Oates, and Mark Duggan for their continued feedback on this project. I also thank seminar participants at the University of Maryland, the NBER Development of the American Economy Summer Institute, the History of Capitalism conference at Harvard University, the Economic History Association conference, and the Cliometrics conference, as well as anonymous referees for their comments and suggestions.
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Hennessey, J. The Adoption of Constitutional Home Rule: A Test of Endogenous Policy Decentralization. Eastern Econ J 42, 441–463 (2016). https://doi.org/10.1057/eej.2014.58
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DOI: https://doi.org/10.1057/eej.2014.58