A Referendum on Infrastructure in the U.S.

On July 31st, local governments in Georgia asked the permission of its voters to levy an additional 1% sales tax to finance a total of $18.7 billion in infrastructure projects within the state.  The list of projects represented a collection of priorities submitted by each of the State’s twelve Regional Planning Districts, created by State’s legislature to prioritize and finance infrastructure in Georgia.  Three quarters of the proceeds of the sales tax would fund the list and the remaining quarter would be diverted to local governments to finance their own infrastructure priorities.

The initiative was soundly defeated in nine of the twelve Regional Planning Districts.  This outcome is troubling for a number of reasons:

  1. Lack of fiscal stimulus.  As described in a paper posted on this web site, “Why Invest Infrastructure”, Xue Han estimates that the fiscal multiplier effect for spending on infrastructure projects is at least 50% higher than that for other forms of government spending.  The reason for this is that a smaller proportion of such expenditures leak out of the economy through imported goods, keeping the economic benefit within the local or regional economy.  Georgia voters opted against such economic stimulus;
     
  2. Lack of feedback from voters.  Other than express a strong preference to live without the list of infrastructure projects, government officials have come away from an expensive election process with little useful information about what their constituents would like for them to accomplish.  Did voters believe the costs outweighed the benefits?  Do they prefer a greater tradeoff with environment concerns upon which the projects would infringe?  Do voters prefer locally planned projects over those planned by counties and regions?  Are they more likely to spend on smaller projects with more tangible benefits to them?  Did they believe they had sufficient information to evaluate the list of projects prior to casting their vote?  State and Regional administrators have answers to none of these questions.
     
  3. Lack of an effective approach.  In most states, elections allow voters to decide who in their governments will identify priorities, conduct analysis of the cost and benefit of infrastructure projects and decide the initiatives that government will fund.  Some states take the election process a step further and invite voters to decide how their tax dollars are spent and on what.  The latter approach of “bring it to the voter” makes it difficult for government to address longer arc problems like managing traffic, building or expanding transportation links and corridors, supplying sources of energy to local economies, etc.  The extreme form of voter involvement is the government of California, in which voters have agreed to a potpourri of initiatives that don’t fit within a cohesive vision and plan for how the voters will live and work in years to come, and ultimately create budget gridlock.

While many Americans are currently expressing their preference for a smaller and less expensive form of government, it is important to remain open to the value of employing professional managers to plan and execute initiatives that benefit the common.  When presented a list of infrastructure projects without the context of a long term plan, voters will never find themselves in the position to make the planning decisions that professional managers of government can make.

 

-William M. Fitzgerald

September 28, 2012