From Local government

Shallow State

Inefficient, inequitable, and maddeningly slow, America’s fragmented administrative institutions are saving the Republic before our eyes.

American elections are run by a messy mish-mash of local, state, and federal agencies. That’s a feature, not a bug. Photo: WHYY

The American administrative apparatus is an astonishing jumble. Scores of federal agencies, fifty states (plus D.C.), 14 territories, hundreds of tribes, and tens of thousands of local governments share responsibility for domestic public policy in the United States. Beyond its inelegance, this mind-boggling fragmentation is a recipe for waste, confusion, and contradiction. No sane person would design a system like this if the goal was efficient, equitable regulation or delivery of public services. It’s a hot mess.

But by brilliant design or happy accident, America’s confusing and convoluted administrative institutions simultaneously allow for and defend against electoral abuse. The slow-rolling drama of this year’s federal elections is a dramatic case-in-point.

Frustrating fragmentation

Federalism—a model of governance that shares authority between a central government and regional subunits—gets a pretty bad rap in political science and economics. Federalism generates inconsistent, often contradictory policies. The whole apparatus is inequitable, as citizens in different parts of the country experience government in very different ways, often with troubling racial or ethnic biases. Administrative systems are redundant, bloated, and sometime work at cross-purposes. Our system of government isn’t Schoolhouse Rock, it’s a Hieronymus Bosch painting.

Every time I move from one state to another and wait in line at the DMV, I wonder: does America really need more than fifty driver’s licensing regimes and insurance regulators? Do we really need to track births, deaths, marriages, and land ownership through 3,000 county governments? Does it really make sense to parcel out responsibility for firefighting and law enforcement and education and health care and trash disposal across tens of thousands of governments?

Brilliantly efficient policies conceived on drawing boards in think tanks, seminars, and congressional hearings slam into this amorphous, chaotic intergovernmental blob. Look no further than the COVID-19 vaccine administration to see what I mean.

Baffling, byzantine, brilliant elections

Disorder and fragmentation also afflict American democracy. Election administration is intensely local in the United States. Elections in this country aren’t run by the Federal Election Commission. In most of the U.S., county and town governments organize and administer elections with state oversight. The work of issuing and counting ballots falls to tens of thousands of local officials and poll workers. Votes are cast and counted with a bizarre mish-mash of technologies. Vote counting is slow, reporting of results is haphazard, and when presidential elections are close, the delays are maddening. Even worse, all this fragmentation can allow state or local authorities to make voting difficult when it’s politically advantageous. Our country has a troubled history of voter suppression and disenfranchisement. The 1965 Voting Rights Act was a landmark step toward addressing those problems, and over the years there have been calls to nationalize voting administration completely.

Voting booths look deceptively elegant.

But ironically, fragmentation of our electoral system is also a safeguard against tyranny. Over the past month we’ve seen a remarkable federalist drama play out in Georgia. Georgia’s top election official and Secretary of State have publicly clashed with President Trump’s obdurate refusal to accept the outcome of the Peach State’s elections. The audio recording of Trump’s phone call with Georgia Secretary of State Raffensperger leaked last week is a testimony to the surprising strength of the nation’s fractured electoral systems.

Raffensperger, an elected official and life-long Republican, steadfastly refused to use his administrative authority to change his state’s election results, despite the President’s cajoling and vague threats. Raffensperger could show this kind of fortitude because he was selected by and is responsible to the voters of Georgia, not to the President of the United States. Raffensperger works in Atlanta alongside other Georgia officials; to capitulate to Trump’s demands would be to dishonor the public servants he sees every day. Just so, elections administrators in each of Georgia’s 159 counties are responsible to their own communities, not the President.

Hard to manage is also hard to hack

It is easy to imagine an alternative world in which Congress sets detailed rules for elections, the President appoints a Secretary of Elections, and a U.S. Department of Elections operates the whole system. Certainly, election administration would be more uniform, and we’d likely get results much faster. But uniform technology for casting and counting votes would make our elections far more vulnerable to electronic mischief. Whatever its other drawbacks, the Rube Goldberg Machine that is our election administration system is reasonably immune to concentrated attack. No vast right-wing conspiracy is possible, no deep-state conspiracy is possible, no national electoral conspiracy of any kind is really possible because our nation’s whole electoral apparatus is so convoluted.

Most of all, locally-managed elections form an inelegant but potent check on executive power. A U.S. Department of Elections staffed by presidential appointees would be glaringly vulnerable to presidential meddling. Would a U.S. Secretary of Elections appointed by President Trump resist manipulation the way that Georgia’s Secretary of State did?

As I write this, Georgia is in the throes of managing its special senate election. The polls suggest a close race, so it’s likely going to take elections officials a while to complete and validate everything. Angry, impatient cries will erupt from every ideological corner, just as they did in the ten days after last November’s federal elections. That’s OK. Our crazy quilt electoral system isn’t pretty, it isn’t quick, and it isn’t particularly fair; but it’s awfully hard to break. At a moment when our institutions are under stress, that is some comfort.

Echoes of Vizzini

No, EPA did not propose affordability guidelines for municipal utilities

Affordability!

Late last week the EPA published in the Federal Register some proposed new guidelines for evaluating sewer utilities’ financial strength. In press releases and public comments, water sector and local government organizations lauded the proposal as an important action on “affordability,” and a few news outlets dutifully reported on the EPA’s new water "affordability" guidance. Likely most people would think that means lower water bills for low-income households.

But the EPA’s proposed guidelines have little to do with affordability as most of us think about that word—the guidelines are not about ensuring that low-income Americans can pay for water. Rather, the proposal is about whether communities have sufficient resources to pay for water pollution controls required under federal law. In practical terms, the new guidelines are about whether sewer utilities have to comply with the Clean Water Act in a timely manner.

Understanding what’s going on here requires understanding a bit about sewers, the Clean Water Act, and why utility managers think about “affordability” differently from the rest of us.  

Clean Water Act and local economics

Municipal sewer systems must meet a variety of pollution control rules under the federal Clean Water Act. Many of these rules require major investments in infrastructure and ongoing operational and maintenance costs. Often these costs can be quite high, especially in older communities that operate combined sewers that suffer significant sewage overflows during rainstorms. Overflows can cause raw sewage to run into rivers, lakes, and coastal waters, with attendant damage to health and environmental quality. The Clean Water Act aims to reduce, mitigate, and eventually eliminate such pollution. Recognizing that pollution controls are expensive, Congress built into the law provisions that a allow sewer utility to delay compliance with water pollution controls if compliance would outstrip its “economic capability.”

Yuck.

With few exceptions, sanitary sewer utilities in the U.S. are owned and operated by local governments. In practice, then, when sewer systems face significant Clean Water Act compliance costs, local officials sometimes try to negotiate delayed compliance with EPA or state environmental regulators by arguing that their communities have insufficient economic resources to comply with the law.

To evaluate these claims, EPA conducts a Financial Capability Assessment (FCA)—an appraisal of water pollution control costs relative to a community’s overall economic resources. This appraisal is supposed to be holistic, capturing a range of economic indicators. Since 1997, a key element of EPA’s assessment methodology has been the residential indicator, which is intended to reflect the impact of sewer system costs on rate payers. The residential indicator is the average sewer bill as a percentage of the community’s median household income (%MHI). When that value exceeds 2.0%, EPA considers pollution control costs to be “high” and potentially eligible for delayed compliance.

This approach isn’t great, but it’s not a crazy way to evaluate community-level financial capability.* Still, the residential indicator has been much-maligned in the water sector and was the subject of a comprehensive critique from the National Academy of Public Administration three years ago. Last year AWWA, WEF, and NACWA joined forces to advance a new analytical framework to guide FCA instead of %MHI. The AWWA/WEF/NACWA methodology incorporated local poverty levels and sought to evaluate Clean Water Act compliance costs in terms of their potential impacts on household sewer bills at the 20th percentile income.

What EPA is proposing

Still with me? Great. The proposal that EPA released last week is a revision to the FCA guidelines with two broad alternatives. Much of the proposal aligns wiht the methodology favored by AWWA/WEF/NACWA. Under the Alternative 1, EPA retains the traditional %MHI residential indicator and the suite of economic indicators in its existing methodology, but would add assessments of local poverty prevalence and potential rate impacts on 20th percentile income households. Alternative 2 would allow utilities to use a “dynamic financial and rate model” to evaluate the impacts of Clean Water Act compliance costs on customers.** At the heart of the new proposal are a pair of tables that integrate the old and new methodologies:

Alphabet soup

More alphabet soup

Recognizing the underlying distribution of economic conditions by accounting for poverty and 20th percentile incomes is an important advancement. Under either alternative, these guidelines are marked improvements on the status quo in that they provide a more complete, nuanced economic picture of the communities that sewer utilities serve.

Still, it’s important to keep the purpose of all this analysis in mind: under either alternative, the FCA would inform EPA’s negotiations with sewer utilities over compliance schedules. The point of these guidelines is to determine whether and how much sewer utilities ought to delay compliance with the Clean Water Act. Compared with current practices, the proposed guidelines are more flexible and could in some instances lead to more permissive regulation.

Financial Capability ≠ Affordability

EPA did not propose guidelines on affordability for low-income water or sewer customers. Under the proposal, EPA could consider low-income customer assistance programs (CAPs) as part of its overall assessment, but nothing in the proposed guidelines requires or even encourages CAPs. The proposed guidelines would not oblige utilities to structure rates in ways that constrain prices for conservative or low-income customers. Indeed, a utility that was looking for ways to delay investments would actually have an incentive to set more regressive prices: high fixed charges and declining block rates would make FCA metrics look worse, and so help justify compliance control delays.

So despite the rhetoric in headlines and press releases, these guidelines really aren’t about affordability in the way that most of us understand the term. Sure, delayed Clean Water Act compliance will reduce a sewer utility’s revenue needs. But EPA doesn’t regulate rates under the Clean Water Act, and so there’s no guarantee that financial savings from Clean Water Act noncompliance will accrue to low-income customers. In short, these guidelines are not about low-income affordability, they’re about utility finances and water pollution.

Don’t blame EPA for this confusion—they’ve been scrupulously clear and consistent that their guidelines are about financial capability. Regrettably, the industry press releases and news stories have been waving an affordability banner where it doesn’t quite belong.

Can communities afford clean water?

All this confusion over terminology invites reflection on what affordability really means. When municipal sewer utility leaders declare that they can’t “afford” to comply with the Clean Water Act, they’re making a political judgment that spending on other things or keeping taxes and service rates low is preferable to following water pollution rules. That is the prerogative of local policymakers. Communities need to pay for many important things, and clean water is just one of them. The democratic process is meant to help us sort out our collective priorities.

That’s why there’s more at stake here than pedantry. In expanding the meaning of “financial capability” to recognize the distribution of incomes in communities, these guidelines invite us to think about the distribution of environmental conditions in the same communities. The proposed guidelines don’t contemplate whether foregoing water pollution control in the name of “affordability” really helps or hurts low-income households. Do working class folks benefit when a city has low utility bills, but faces frequent and ongoing sewer overflows? Who suffers when raw sewage flows into rivers, lakes, and harbors because utilities can’t “afford” Clean Water Act compliance?

Using the right words compels us to confront these uncomfortable questions, and focuses our attention to what FCA guidelines mean where the sewage meets the street.



*%MHI is, however, terrible, horrible, no-good, very bad way to measure low-income household affordability.

**This alternative is going make rate consultants happy.

Graphic Realism

Organization of U.S. drinking water utilities in a few simple figures

Here are some graphs that convey ​a few key things about the organization of drinking water utilities in the United States​.*

​Source: EPA SDWIS

​There's a lot of important information ​in those graphs, but these are the most important for policymaking purposes:

  1. Fragmentation. There are nearly 50,000 community water systems in the United States, an order of magnitude more than electrical and gas utilities combined.
  2. Ownership & governance. The overwhelming majority of Americans (84%) get their drinking water service from local government utilities, rather than investor-owned utilities. This proportion is opposite from the energy sector, where investor-owned firms ​hold the lion's share of the market.
  3. Size. The distribution of systems is highly skewed in size: over half of American community water systems are very small, serving populations of less than 500​; the largest 434 systems serve nearly half of the U.S. population.

These three realities inform virtually every aspect of water system management, operations, finance, and regulation. Any successful effort to improve or reform American drinking water utilities must account for the political and administrative challenges that these realities present.

Organizations are human creations, so we can change them if we want to. But we can’t ignore them.



*Feel free to copy and use; please link to this ​page.