When local media dies, government spending and waste increases

We have many real world examples to draw from when looking at newspaper shutdowns and the aftermath. A study from researchers at the University of Notre Dame and the University of Illinois/Chicago has been able to quantify the impact on the community, or at least the local government, and the impact on taxpayers.

Local newspapers hold their governments accountable, says the opening line from the study.

“Following a newspaper closure, we find municipal borrowing costs increase by 5 to 11 basis points in the long run.” – Notre Dame/Univ of Illinois Study

The paper cites the closure of the Rocky Mountain News in Denver, The Cincinnati Post, and the number of stories they did as government watchdogs.

It also points to the specific case in Bell, California where the local paper shut down in the 90’s. A Los Angeles Times investigation found that the city of 37,000 with a median hourshold income of $30,000 somehow was paying their town manager $787,637 a year… and paying their police chief $457,000 (50% more than the chief in LA). The report “suggests that the corruption in Bell, California went unchecked for such a long time because of a lack of local newspaper coverage.”

“Identification tests illustrate that these results are not being driven by deteriorating local economic conditions.” The study concludes. “The loss of monitoring that results from newspaper closures is associated with increased government inefficiencies, including higher likelihoods of costly advance refundings and negotiated issues, and higher government wages, employees, and tax revenues.”

The study looked at 1,596 newspaper serving 1,266 counties between 1996 and 2015. During that time, 68 papers closed, 152 published less than four times a week (reduced from a daily), 59 merged into other papers, and 17 more shut down for undetermined reasons. Between 1996 and 2015, 296 newspapers exited the business.

“Thus, a newspaper closure leads to a significant increase in risk for municipal bonds issued in that county.”

Of the 3,129 counties in the US census during that period, more than half do not have a daily newspaper covering them.

“We propose that newspaper closures affect long-run municipal borrowing costs through the government inefficiency channel, and provide evidence that government inefficiencies are more prevalent following a newspaper closure.”

The report notes that in several cases, online sites came into existence that are providing local coverage in some of these areas. “However, these paradigm-shifting news outlets do not necessarily provide a good substitute for high-quality, locally-sourced, investigative journalism,” the study says.

It ends quoting ex-Baltimore Sun reporter and TV producer David Simon: “The day I run into a Huffington Post reporter at a Baltimore Zoning Board hearing is the day that I will be confident that we’ve actually reached some sort of equilibrium.”