Financial Foundations Framework, Rethinking Budgeting

Addressing Resource Inequities Between Governments

Research Report

Local government fragmentation refers to the fact that local governments are broken into many, often overlapping, jurisdictions. In aggregate local governments spend a great deal of money. It is reasonable to ask if the public’s interest would be better served by better coordination of government at the local level.

In Parts 2 and 3 of this series, we examined information age approaches for improving the financial performance of government through networked enterprises and government as a platform. Taken together, we found that these approaches can improve coordination and provide many services and financial benefits. However, our analysis did not address one disadvantage of local government fragmentation: resource inequities between local governments, also known as “fiscal disparities.” The most well-known example of fiscal disparities is the disparity between school districts. This happens when schools are funded mainly by local property taxes and when some districts have a higher value of taxable property in their boundaries than others. This will result in some children getting a worse education based on where they live. Fiscal disparities can occur in municipal governments due to the value of taxable property in the jurisdiction relative to the need for public services.

In this fourth part of our four-part series on addressing the financial consequences of local government fragmentation, we will focus on fiscal disparities.