McKinsey report shows need for municipal transparency


At the press conference on the release of his budget a couple of weeks ago, the Governor referred to a new study by the McKinsey & Co. consulting firm, which he said indicates that there are millions of dollars in savings to be had if local municipalities and the newly created Regional School Units would work together more effectively.  To that end, his budget contains an initiative that would provide grant funding for such consolidation efforts, paid for by Municipal Revenue Sharing funds that would otherwise go to the towns. 

This is not the first time the governor has pushed the issue of consolidating municipal services.  Years ago, he pushed for the creation of “Municipal Service Districts,” which would have regionalized municipal services such as assessing, code enforcement, solid waste management, and so forth.  It went nowhere, but the governor has remained a passionate supporter of somehow making municipal governments spend less money, in the belief that they, not the state, are the big spenders.  In keeping with his philosophy, his new budget cuts funding to the towns dramatically.

The problem is not only that research by MHPC shows that spending my Maine’s local governments is lower than national averages, the McKinsey report, though it doesn’t say so, also suggests that larger municipalities spend more money, not less.

An actual report from McKinsey & Co. may exist, but it does not seem to have made the rounds yet. What does exist is a PowerPoint presentation featuring highlights of the report. 

One of the McKinsey PowerPoint slides features the following chart, which purports to show the high degree of variability in per-person spending between towns of the same size.  The vertical axis shows non-education-related municipal spending per person, the horizontal axis shows the population of the municipalities studied.

Kinsey visual.jpg

What is conveniently missing from the chart is trend line showing what kind of relationship might exist between per-person municipal spending and the size of the municipality.  If, as the governor suggests, larger towns are more efficient, one would see per-person spending decline as municipality size increases. 

To test this theory, I constructed my own chart, using data from the Maine Municipal Association’s 2007 Fiscal Survey Report, a collection of municipal revenue and spending information provided to MMA by nearly 200 of its member municipalities.  (Towns were not required to provide the data, so many towns, including some of the largest, are missing from the survey.)

As McKinsey suggests, there is indeed wide variability in per-person spending between municipalities of like size.  There is also a distinct relationship between the size of towns and the amount of per-person spending they do.  The larger the municipality, the more it spends:

MMA data chart.jpg
The wide variability in spending certainly suggests a need for far greater transparency and accountability on the part of municipalities.  At the very least, towns should be required to provide, in a format that lends itself to easy comparisons,  the kind of revenue and spending data the MMA collects.

The data also suggests, though, that Maine’s small towns are doing just fine holding the line on spending, thank you.  Cities like Portland, South Portland, Lewiston, Brunswick, and Auburn did not even submit data to the MMA, yet MMA’s data still indicates that Maine’s larger towns spend more per-person.

Bigger government has been the mantra of the Baldacci Administration from the start but there is little evidence it will save money. What will save money is transparency and accountability on the part of municipalities, counties, and the state.