For several decades, Neal Peirce has been a national journalist in Washington, but with a sharp eye focused also on the state and local scenes. He is the author of the newspaper column “Citistates Reports” (formerly called the “Peirce Reports”), which concentrates on strategic issues for many regional newspapers.

The country’s first national newspaper column focused on state and local themes, it is syndicated by the Washington Post Writers Group. He has also written a fascinating 10-book series on America’s regions and states, published by W.W. Norton.

Peirce chairs the Citistates Group, a network of journalists, speakers and civic leaders focused on building competitive, equitable and sustainable 21st-century regions. The group is currently working on the New England Futures Project, on strategic issues facing the six-state region, to be finished this fall.

Peirce asks the question: In the 21st century has state government become a historic remnant? Or are states the country’s hope in a time of a stalled and negative federal government? Are their days of policy innovation and national eminence, running from the 1970s to the mid-1990s, due for a comeback?

In April, Neal Peirce addressed a meeting of state policy innovators—some one hundred men and women who have been associated with the Council of State Planning Agencies and the Council of Governors Policy Advisers, two groups with reputations as hotbeds of innovative thinking about our states. What follows is based on some ideas that emerged at that meeting.

How much—and how well—have the states been exercising the large reservoir of powers granted to them under America’s federal system of government?

There was a major era of post-World War II reorganization and a constitution-writing flood that seemed to prime the states for an activist role, especially in the wake of the civil rights revolution. They started to use their tax bases to advantage in a dramatically expanding economy. In the 1980s, state activism really took off, in a sort of post-federal era under the conservative national administration of President Ronald Reagan, which left a lot of space for state action.

There were ups and downs, but states ventured increasingly into the social arena, taking on K-through-12 education, welfare reform and other issues. State activism kept advancing for a couple of decades. And there is an argument that it states are still on the move today.

Look at the enthusiasm, reversals and all, in which states have leapt into the internet technology age. Or witness the willingness of California voters to make a mega-investment in stem cell research, with their Republican governor in support, and defy the position of a Republican president to launch California on a dazzling but risky biotech discovery path. Money is going into research and development instead of job-producing factories. That is positive evidence of a move beyond traditional smokestack-chasing.

Still, viewing the entire state scene I’ve written of since the 1960s, my feeling is one of burning impatience. Here is this magnificent American federal system—a union of states that hold immense original powers, a system perfectly designed for experimentation and innovation. And what do we do?

The states stay in lockstep with bicameral legislatures. Only Nebraska has dared to try an alternative, switching to a single unicameral legislature. No other state, though any one of them could, has experimented with that parliamentary system.

After a century of tumultuous global change, with even more, and maybe even scarier, change to come, we have remained saddled with antiquated local government structures that the states refuse to reform. We’re fragmented into thousands of local units—cities, townships, villages, boroughs.
MUNICIPAL COMPETITION—Many states suffer bitter town-against-town battles for tax-producing industries or chain stores, giving private corporations outrageous concessions. Plus, most state governments tightly restrict local governments’ taxing powers, denying fundamental self-government to local citizens.

There are many ways the states could better use their powers. I have written a lot in the last 15 years about the phenomenon of “citistates”—how Americans have poured into metropolitan regions that provide the universities, industries, legal and financial power that keep state governments solvent. They also keep the nation competitive in global markets.

But state legislators and departments too often micromanage their local governments. They could do a lot better, like smart corporations dealing with subsidiaries, by giving regions autonomy and then demanding performance from them that would make regions, in corporate-speak, the “cash cows” that fill state coffers and subsidize rural areas.

I am willing to admit that the Feds cause or amplify a lot of states’ woes. Just check Medicaid as it threatens to devour state budgets—a huge current emergency—and the costly dictation of the No Child Left Behind Act. Even so, states themselves make too many poor decisions. For example, they have bowed to law-and-order politicos, criminalized drugs and jailed their populace so excessively that America now has the world’s highest imprisonment rate, hitting minorities the hardest.

This latter is an inexcusable outrage in our time. Many states now spend more on prisons than on universities. What insanity in a 21st-century world! We are still far from the social reforms and programs that would give all citizens a foothold on the ladder of personal growth and income security. So, let us close down hundreds of those prisons.

Moreover, too few states have exhibited the courage to experiment with fundamental health system reform as in Maine, Tennessee, Oregon and a few others.

On the issue of taxes, 21 states deserve credit for collaborating on a streamlined sales tax project covering Internet and mail-order sales. That’s a way of working together that was unimaginable two decades ago.

And what about expanding sales tax coverage from consumer goods to services, where today’s new wealth is being generated? With today’s alarming income polarization in the U.S., how many states are doing anything to make tax codes more progressive? It’s sort of an irony that a handful of Republican governors are now starting to raise taxes.

With the national government pointing our society toward horrendous deficits, spurning federalism while obsessing over a right-wing political agenda, the need for the states to be a balance wheel has never been greater. But the outlook is tough, and managing the challenges creatively can be a burden.

We do see a rise of new budget techniques, alternatively called “budgeting for outcomes” or “activity-based budgeting.” That was tried first in Washington state a couple of years ago by the Gary Locke administration.

The idea is to replace stale old line-item budget tinkering with a dynamic process of regularly defining the actions of state government that citizens consider the most critical and desirable, and then to define priority lists of what’s affordable and living with the reality that some items won’t make it onto the list of what the revenue will cover.

A growing number of other states are moving to adopt the new activity-based budgeting, among them South Carolina, Iowa, Michigan and Oregon. That’s a healthy development.

Multiple obstacles remain, not the least of them being basic education from early childhood on, and the critical high school, college or technical school connection for the 21st century’s high-demand economy. What state has put together a successful cradle-to-adulthood educational and job training program that doesn’t leave vast numbers of people dropped out, semi-literate, on the sidelines of life?

SERIOUSNESS IS DAWNING—Our communities and regions need to develop in much smarter ways and more compactly, focusing more development in established cities and suburbs, including transit-oriented development. There is a need to cut back on the continuing rapid loss of open spaces—across the continent at some 350 acres an hour. Some states have begun to fight the auto-oriented, sterile-zoning, throwaway-community approaches of the last 60 years.

The new issue is creating more compact, and therefore walkable, communities so we don’t end up as a nation of obese sludges, slaves to our cars. New approaches to energy, combating pollution and global warming, represent a critical frontier given the national government’s current appalling indifference to the country’s dependence on oil.
The great 21st-century mission of states may be to lead and assist local governments, and our society as a whole, in finding affordable and ingenious solutions. Any narrowly targeted set of reforms—in education, economic development, housing, environmental protection, social systems, corrections, whatever issue you can name—is likely (1) to seem unaffordable and (2) to fail. If done piecemeal, the totality of costs across multiple areas of government operations is surely beyond what taxpayers will bear. And policies developed in isolation from each other are all too likely to fall short.

COLLABORATION—But imagine a smarter scenario—states using their immense budgeting powers more smartly to inspire much better practices and outcomes. Schools that don’t close their doors at 3 p.m. each weekday and all weekend and all summer but instead become fully integrated centers of neighborhood life, including recreation, libraries, adult education, health clinics, and more.

Imagine state transportation departments that work closely with communities to meet their needs rather than crushing them with ill-planned highway projects. State help for regions in development should include of all sorts of alternatives, including innovative transportation systems.

We need state inducements for more compact growth as water and sewer systems get renewed or built. And there needs to be a share of affordable housing in every town, so that the jurisdiction’s own police and teachers and clerks can afford to live there. We need housing availability so that low-income families can stay put longer, don’t have to travel frightening distances to find work, and can avoid the constant moves that so disastrously disrupt their kids’ lives, including their educational lives.

We need to work on high school and community college connections so that fewer young people get left on the sidelines of the 21st-century economy.

A strong governor’s cabinet, focused on all these cross-cutting issues and working collaboratively with communities, can be a powerful weapon. It should be a state’s responsibility to set broad goals and policy directions that work in mutually reinforcing ways toward integrated environmental, economic and social goals.

Local bureaucrats have a role to play too, actually a critical one, bringing localities together and helping them form collaborative, region-wide strategies that match their state’s common goals.

Take, for example, the typical American problems of thousands of small towns or counties, each with a full-blown set of government offices. In a simpler age, amateur local government worked well enough. Neighbors helped neighbors, services were personal and often volunteer-manned, and the costs weren’t high.

But in many states the system has clearly veered off track, with escalating costs and rising frustrations. And what is the culprit? Sprawl, says Angus King, Maine’s immediate former governor. King’s planning director, Evan Richert, found that when a small town in the path of suburbanization passes the 3,500-person mark, citizens start demanding a town manager, more police and professionalized services, and budgets start to soar.

King’s staff drew a 20-mile circle around Augusta, Maine, and found that within that radius there were 91 fire trucks serving 95,000 people. Not one of the monster trucks—priced from $100,000-$500,000 each and up—was jointly owned by the communities.

Hit by rising costs, the towns end up competing furiously for property taxes and development. John Baldacci, Maine’s present governor, told me that the competing values of fiercely guarded home-rule and Yankee love of frugal government are rubbing together in “full collision.”

“It’s going to be collaborate or collapse,” says a leading Maine economist, Charles Colgan of the University of Southern Maine.

So Governor Baldacci has inaugurated a “regionalization” program of cash incentives for localities that agree to curb local tax rates through systems of shared services between towns or school districts. It’s an approach that could well be adapted across the U.S.—frugality by incentive.

The states need to play a role in this push for better budgeting. State governments, which almost uniformly send major aid to localities, need to pierce the veil of each town or school district’s bookkeeping and insist: “We need to know how state grants are being spent. Understandable and comparable numbers—real transparency—that’s our price for continued support.”

In an age when critical local government records rested in dusty ledger books and manila folders, it would have been impossible for states to determine what was happening in their towns and counties and school district offices. But now, with increasingly standardized accounting programs and the rapid advances in digitized data processing and Internet dissemination, realistic data comparison has become easier.

Such knowledge alone doesn’t assure a politics of accountability, equity and concern for the public good. Ideological campaigns, term limits and often neglectful media coverage have destroyed too much of our civic fabric. But in our alarm about what’s been lost, it would be a mistake to miss some exciting new possibilities.

State leaders—governors and their administrators—need to adopt a 21st-century view of state potentials, recognize how myriad policies interact, adopt smart new budget systems, work closely with local leaders and citizen groups, and insist on robust use of the new information technology that is so abundantly available. A new golden age of state leadership? Why not?