efforts to promote more functional cooperation and to reduce the servicing conflict that may be produced by widely varying patterns of functional assignment.

SUBSTATE FUNCTIONAL ASSIGNMENT CRITERIA, THEORIES AND PROCEDURES, STRUCTURE, AND FUNCTIONS

The previous analysis suggests in national terms a fairly clear functional assignment among the Federal, State, local, and interlocal levels. At the same time, this pattern is flexible and dynamic, since it is subject to a variety of intergovernmental forces: fiscal transfers, fiscal pressures, structural modifications, procedural adaptations, and program developments. Any attempt to clarify and to rationalize these diverse and frequently conflicting conditions of the substate regional governance system must come to grips with the basic components of a conscious assignment of functions policy.

Volume IV of this report points out there are three main components of a performance of functions policy: formulating criteria by which urban functions can be assigned, assessing the capabilities of the various institutional and procedural means of delivering assigned services, and determining what aspects of a function should be assigned to different types and levels of substate government. How these components are handled in a substate regional context will be the focus of the remainder of this chapter.

Assignment Criteria.

Assignment criteria are useful both for classifying functions and for evaluating institutional candidates for delivering a particular service.

The ACIR report Performance of Urban Functions: Local and Areawide constituted the first real effort to develop guides to political judgments about whether to allocate functions to an areawide or local unit of government. The study specified seven criteria for the assignment of urban functions, 5 arguing that the application of these criteria would permit more effective provision of urban services. The criteria were applied to 15 selected urban functions which then were classified as local, areawide, or intermediate. The report further differentiated among the tasks involved in a given function and suggested a parcelling out of subfunctions or components of a single function among levels of metropolitan government. It noted that certain activities could be performed equally well at one or another level of government. Speaking of the need for adequate capacity to finance a given function, the report stated:

.. Because of the great diversity of economic characteristics among the jurisdictions within a metropolitan area, efficient allocation of responsibilities does not necessarily coincide with distribution of economic resources needed to sustain the appropriate package of public services. . . . In any case, application of the economic criteria for allocation of functional responsibilities must be modified to take account of the large intercommunity variations in tax bases and qualitative and quantitative demands for public services.6

While technically a particular function could be defined as generally areawide or local in nature, the

report was careful to point out that the balancing of the assignment standards was ultimately a matter of local political determination. Some areas might wish to provide minimum levels of public service to all communities under the fiscal or operational aegis of an areawide unit while others might permit service levels to be exclusively determined at the local level. In either case, however, ". . . political choice will affect the application of economic criteria for allocation of functions in any given metropolitan area." In short, political values would weight the various assignment criteria and ultimately determine the allocation of functions. 9

The Commission report provided a detailed set of economic, political, and administrative criteria on which public service assignments could be based. It applied these criteria to selected functions to suggest how they might be allocated among local and areawide bodies. The Commission, however, did not judge the relative importance of these criteria nor recommend a particular governance system to embody them. Such matters were to be subject to local determination. At the same time, these criteria provided a technical yardstick by which to evaluate the functional assignments of whatever metropolitan governance system an area chose to institute.

Although the Commission's original criteria have stood up rather well, they can now be restated to guide contemporary functional assignment decisions. More specifically, four main standards might guide functional assignment policy: economic efficiency, equity, political accountability, and administrative effectiveness.

Economic Efficiency. In specific terms, functional efficiency can occur with conditions of economies of scale, public sector competition, and public service pricing.

Economies of scale are realized in a function when jurisdictional size is increased or reduced and the resulting unit cost of a function is lowered. For instance, highly technical but standardized functions. such as water supply, sewerage disposal, or highways can be performed at a lower unit cost in larger jurisdictions. The same can be said for supportive services such as communications. Such economies of scale result from (1) employment of technological advances, (2) greater specialization and division of labor, (3) more ability to adjust for public service certainties, and (4) more ability to take advantage of pecuniary savings involved in large-scale purchasing.

On the other hand, the unit cost increases when coordination costs are high, when a service requires more labor than capital inputs, or when it is not susceptible to standardization. Most often, human resource services fall into these categories when performed in larger jurisdictions. They are probably best provided at lower tiers of government.

Another aspect of the efficiency criterion involves public sector competition. With this some seek to provide some public services by approximating private market techniques so that the individual taxpayer can consume just those services that he desires and at the lowest possible cost. While provision of all public goods in this manner is impossible, there are several ways of developing some public sector competition. Numerous local governments can be established to provide different "baskets" of public goods which taxpayers then consume by simply moving into the locality that best reflects their pref

erences. Incentives can be set for both local governments and private parties to act as contract service providers for other units of local government, or cash transfers can be made to individuals so that they can directly consume only those goods that they most desire.

A final aspect of public sector efficiency deals with pricing policies for public goods. The pricing technique permits more efficient production and distribution of public goods, since consumers will only purchase as much of the particular public good as they need or desire at the specified price. Consequently, pricing will cut down on unnecessary production of a good as well as curtail consumption patterns that may be socially undesirable.

In sum, the economic efficiency standard may call for taking advantage of economies of scale in a function, for promoting public service competition by different types and levels of local government, and for using market-type pricing policies in the delivery of public services when feasible. These components

may be used separately or in combination, although conflict may occur when economies of scale and public sector competition are applied simultaneously.

Equity. Another important assignment criterion is public service equity. Specifically, the equity standard is met when economic externalities or spillovers in a function are reduced and when interpersonal and interjurisdictional equalization occur in the financing of a function.

Avoidance of economic externalities was a criterion in the first Commission report. Then as now, interjurisdictional spillovers produce uncompensated costs or benefits for parties that do not directly produce or consume a public good. In concrete terms, residents of rural areas do not benefit from the educational investment they provide to children who subsequently migrate. Central city taxpayers have economic costs imposed by concentrations of poor populations with high-cost service needs. Similarly, a downstream community incurs the costs of upstream population.

Externalities hinder the production or consumption of a public good. Thus, when a community loses benefits from the production of a good, it will produce less of the good. When it does not bear the full costs of the good, it may overproduce the good due to its artificially low price. Conversely, when a community receives the benefit of a good that another community produces, it is receiving an economic windfall; when it incurs a cost spillover, it is being taxed, in effect, for benefits enjoyed by others. Interjurisdictional fiscal inequities then arise from spillovers. Thus, it is a matter of basic fairness that a jurisdiction be compensated for the service benefits it provides others and be liable for the costs it imposes on others.

The equity principle also deals with the distribution of economic or fiscal capacity among individuals and political jurisdictions. Put simply, poor individuals or jurisdictions cannot always provide the essential goods that they require. Consequently,

fiscal equalization policies are required to insure that a jurisdiction or individual can buy a level of public service at a price that is not more burdensome than the price that most other jurisdictions or individuals would pay for that service.

As the research of ACIR attests, fiscal capacity is unequally distributed among both individuals and jurisdictions. In the absence of compensatory adjustments, this distribution of economic resources means that some individuals and jurisdictions can purchase only minimal levels of essential public services, such as education, under an exorbitantly high burden. Equalization of fiscal capacity among individuals or jurisdictions, therefore, remains a key problem in functional assignment.

Political Accountability. Another criterion for functional assignment deals with accountability in public goods provision. This criterion emphasizes both giving the individual citizen a choice in con

Taxation