At least two states are debating the merits of consolidating local government services to save money. In Pennsylvania, officials with the state Department of Community and Economic Development (DCED) have proposed that consolidating services can save local governments money and stabilize tax rates. The Indiana University's Commission on Local Government Reform (CLGR) has taken the same position, however, the Fishers, Ind.-based Indiana Township Association (ITA) recently expressed doubts about the actual savings that would result from consolidation.

Pennsylvania municipalities that are laying off employees and cutting services in response to the recession can benefit from consolidation, DCED Deputy Secretary Ken Klothen said at a public forum in Lackawanna County, Pa., in February. "If [cities] shared services, the financial pain would not be so great," he said. Klothen also expressed support for two proposals from Pennsylvania's State Planning Board, one that would strengthen the state's Intergovernmental Cooperation Law and another that would establish a Regional Police Services Act.

The Indiana CLGR issued a report in December 2007, "Streamlining Local Government: We have got to stop governing like this," that also argues in favor of consolidation. But, last month, ITA published a report, "Government Consolidation in Indiana, Separating Rhetoric from Reality," that shows how local government consolidation does not lead to greater government efficiency and does not save the state money. "Some barriers [to financial savings through consolidation] are operational, such as the necessity to harmonize labor costs and service levels, which typically rise to that of the highest consolidating jurisdiction, throughout the entire new jurisdiction," the ITA report states. "One of the most important barriers is the reduced accountability that occurs as governments become more remote from voters and more accessible to spending interests, which naturally tends to increase expenditures in the longer run."

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