Lessons from the state shutdown. Avoiding fragility in governance.

Having recently experienced a Minnesota state government shutdown (and on the verge of a federal one), we should draw some more fundamental lessons than the left vs. right politics are messed up, personalities affect outcomes, etc. These are all true given the structure of the game. Why must the game be structured this way?
We have over the past two centuries centralized government, removing functions from independent groups of individuals (charities, guilds, clubs, companies) and brought those functions into centralized government. (Well, several single centralized governments: national, state, local). There were reasons for all of these changes as they occurred, but the reasons at the time may or may not still apply. Sometimes the government service emerged from a central government when the economies of scale were large, sometimes the function is a result of state takeover of private institutions.

I propose the lesson to be learned is that, to avoid a total government shutdown, the government should not be totally central.

The budget should not be unitary, with all resources into a giant pot, where it is centrally allocated out to all functions. This structure makes the government fragile. A robust government should not shut down because of an impasse. Each department/division/agency should have its own revenue sources and its own expenditure authority, most of which are not subject to annual legislative approval. So for instance, the Department of Transportation has a gas tax and some miscellany. A transportation commission decides the expenditures and the revenues required to satisfy them, and with approval from a public utilities commission for any changes in rates, goes forth, and collects revenue and spends money as needed to provide services. This kind of DOT is not shut down because of a decision impasse in some other department.

Looking up the functions of state government, I found the list below of the Governor’s Recommendations by agency. The shear number of agencies is almost enough to make one a (big ‘L’) Libertarian.

I believe many of these functions are important, and many of course are relatively small. In the small category, The Barber Board, for instance has $188,000 in expenses and $221,000 in revenue. But does barbering really require (a) state licensure (Matthew Yglesias has been doing a series mocking licensing requirements), and (b) state budgetary approval, i.e. shouldn’t this be self-managing and autonomous, so it does not need to be on budget. Why should a profitable unit of state government be subject to shutdown? Can’t the state just charter a Barber’s Guild (Civil Engineer’s Guild, etc.) and be done with it?

[We could then deregulate, and allow you to get your hair cut by someone not in the Barber's Guild, at your own risk of a bad haircut. Similarly (if not more controversially) with a Civil Engineer's Guild, where there would be a regulation for full disclosure so that the building would have to prominently identify the engineers and architects and who certified them. If insurance would not be given on buildings not designed by certified engineers, few would build, live in, or work in such buildings. If insurance is readily given, perhaps the certification is not deemed valuable.]

Many of these regulatory or service units are, or should be, self-funding, suggesting they need not be state agencies. Many of the “Boards” fall into this category.

DOT of course could break even with an appropriate user fees.

Corrections historically was a profitable agency, Stillwater wanted the prison back in Territorial days as the free labor helped the logging industry. I am not suggesting we recreate that, but if we reduced the number of prisoners by decriminalizing more drugs, e.g., and then managed the remainder, we might have companies bidding to operate prisons, rather than subsidizing it.

Police similarly could break-even on many crimes, misdemeanors and offenses, by charging appropriate fines. This might create perverse incentives if carried too far, fines could not be too high or the police would have no revenue due to no crime. But fines instead of, or in addition to, prison could be considered for more non-violent crimes. Other departments also have enforcement/fine characteristics (human rights, agriculture, commerce, labor and industry, etc.) which could be separated. An off-budget Board (appointed by the Governor with Legislative consent) would manage the revenue and expenditures, and would have authority over some revenue stream (e.g. licensing) (as authorized) until the authority was removed.

If we can separate the regulatory and redistributory functions, and rethink what is provided by government vs. what government wants to ensure is provided, we can have a robust network of separate, smaller institutions (public and private), and a minimal centralized structure that can be paralyzed at the whim of a few parties.

This is a blog post, not a thesis, so I won’t go into every department and suggest how it could be given autonomy (revenue + authority), but many of these are self-apparent.
The list of State Departments

  • Administration Dept
  • Agriculture Dept
  • Commerce Dept
  • Corrections Dept
  • Education Dept
  • Employment Economic Development Dept
  • Health Dept
  • Human Rights Department
  • Human Services Dept
  • Labor & Industry Dept
  • Military Affairs Dept
  • Natural Resources Dept
  • Public Safety Dept
  • Revenue Dept
  • Transportation Dept
  • Veterans Affairs Dept
      The full list of state agencies

      • Accountancy Board
      • Administration Dept
      • Administrative Hearings
      • Agriculture Dept
      • Agriculture Utilization Research
      • Amateur Sports Commission
      • Animal Health Board
      • Architecture, Engineering Board
      • Arts Board
      • Asian Pacific Council
      • Attorney General
      • Barber Board
      • Behavioral Health & Therapy Board
      • Black Minnesotans Council
      • Campaign Finance & Public Disclosure Board
      • Capitol Area Architect
      • Chicano Latino Affairs Council
      • Chiropractors Board
      • Combative Sports Commission
      • Commerce Dept
      • Conservation Corps Minnesota
      • Corrections Dept
      • Cosmetology Board
      • Court of Appeals
      • Dentistry Board
      • Dietetics & Nutrition Practice
      • Disability Council
      • Education Dept
      • Emergency Medical Svcs Reg Board
      • Employment Economic Development Dept
      • Enterprise Technology, Office of
      • Explore Minnesota Tourism
      • Gambling Control Board
      • Governor’s Office
      • Guardian Ad Litem Board
      • Health Dept
      • Higher Ed Facilities Authority
      • Higher Education, Office of
      • Historical Society
      • Housing Finance Agency
      • Human Rights Department
      • Human Services Dept
      • Humanities Center
      • Indian Affairs Council
      • Investment Board
      • Iron Range Resources & Rehabilitation
      • Judicial Standards Board
      • Labor & Industry Dept
      • Legal Profession Boards
      • Legislature
      • Lottery
      • Marriage & Family Therapy Board
      • Mayo Medical School
      • Mediation Services Bureau
      • Medical Practice Board
      • Metropolitan Council
      • Military Affairs Dept
      • Minn Management & Budget
      • Minn State Academies
      • Minn State Colleges & Universities
      • Minn State Retirement System
      • Natural Resources Dept
      • Nursing Board
      • Nursing Home Admin Board
      • Ombud For Mental Health & Developmental Disabilities
      • Ombudsperson for Families
      • Optometry Board
      • Peace Officers Board
      • Perpich Center for Arts Education
      • Pharmacy Board
      • Physical Therapy Board
      • Podiatry Board
      • Pollution Control Agency
      • Private Detective Board
      • Psychology Board
      • Public Defense Board
      • Public Employees Retirement Association
      • Public Facilities Authority
      • Public Safety Dept
      • Public Utilities Commission
      • Racing Commission
      • Revenue Dept
      • Science Museum
      • Science & Technology Authority
      • Secretary of State
      • Sentencing Guidelines Comm
      • Social Work Board
      • State Auditor
      • Supreme Court
      • State Taxes and Local Aids and Credits
      • Tax Court
      • Teachers Retirement Association
      • Transportation Dept
      • Trial Courts
      • Uniform Laws Commission
      • University of Minnesota
      • Veterans Affairs Dept
      • Veterinary Medicine Board
      • Water & Soil Resources Board
      • Workers Comp Court Of Appeals
      • Zoological Board

4 thoughts on “Lessons from the state shutdown. Avoiding fragility in governance.”

  1. Yeah, but Yglesias points out that the cartel authority is strongest is fake “low-tax” states precisely because licensing fees are stealth taxes that Republicans don’t have to call taxes. This is part of a shell game – to pay for public-sector pensions and other long-term debt. So until we have a larger conversation…

  2. If an agency is dependent on income based in punitive fines, what is there to prevent the agency from abusing the populace when they have budget problems or want to grow?
    We are already seeing problems with revenue generation via traffic citations.

  3. Does a more decentralized system also call for more democracy? If budgets and decision-making are more independent shouldn’t the public have a more direct way to voice approval or disapproval of the heads of various semi-autonomous agencies? In other words, would the head of MNDOT need to be elected to ensure accountability? If so, this perhaps creates a lot of administrative problems while seeming to solve the budgeting problems.

  4. @ David Samuels – Yes, but the cartel (of Barbers) would not be a de jure monopoly, only one if people let it be. They would not be allowed to smash the windows of or otherwise intimidate non-guild members, just trash them verbally subject to the normal advertising regulations.
    @Valkraider – The agency Board of Directors would be appointed by the governor with legislative approval, so would have political sensitivities about exploiting monopoly powers. Similarly rates would be regulated. I suppose enforcement could be stricter or less strict, but the courts will decide if enforcement is too strict. Otherwise it encourages law-abiding. And if the law is an ass, change the law, don’t just wink and nod to violations.
    @Brendon – In principle I like elections to Boards, but then there is the monitoring problem. California has this in spades. Hence the suggestion the Boards be appointed/confirmed by the executive/legislature. The rates meetings (in front of the PUC) would be a major forum for public feedback. Elected officials still have some pull, as Board members are likely former politicians or experts (see e.g. the U of Mn Regents), ensuring some political sensitivity.

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