Do Cities and Counties Attempt to Circumvent Changes in Their Autonomy by Creating Special Districts?

This study uses 40 years of data from the U.S. Census of Governments to examine the impact of changes in local autonomy on the creation of the fastest growing form of local governments, special districts. Using fixed effects regression specified at the urban county and metropolitan statistical area level, we find that restrictions of fiscal autonomy of cities are associated with creation of new special districts. When the limits on fiscal autonomy interact with grants of functional autonomy, amplification occurs. We find no analogous effects for county governments. These two findings are consistent with the circumvention argument made in the local autonomy literature