Emergency Financial Manager controversy continues

Mar 11, 2011

As protests continue in Madison over a controversial bill removing collecting bargaining rights from some public unions, attention is drifting to Michigan.

Governor Snyder has responded to reports and protests by saying that he does not want to follow Wisconsin Governor Scott Walker's example, reiterating in an interview with WXYZ that he is eager to solve problems--including the specifics on $180 million dollars worth of concessions from state employees--through the collective bargaining process, and that he "was hired to solve Michigan's issues."

But whether Governor Snyder wants attention from national media or not, it is happening, including a ten-minute report on last night's Rachel Maddow Show.

But what does the law actually say? What is an Emergency Financial Manager? How are they appointed?

The following is taken from the "Frequently Asked Questions Regarding Public Act 72 of 1990, Local Government Fiscal Responsibility Act, and the Appointment of Emergency Financial Managers."

And if the title wasn't a clue, the explanation is a little long.

From the FAQ:

 What triggers the Act?

Among the conditions specified in the Act are the failure by a unit of local government to pay creditors, the failure to make timely pension contributions, and payless paydays. In addition, certain officials, or residents, of a unit of local government may request a preliminary review under the Act, as may either the State Senate or House of Representatives.

What happens when the Act is triggered?

The State Treasurer conducts a preliminary review of the financial condition of the unit of local government. Once that review is concluded, the State Treasurer reports the result to the Governor. If a serious financial problem is found to exist in the unit of local government, the Governor then appoints a financial review team to conduct a more detailed review of the financial condition of the unit of local government.

What is the purpose of a Financial Review Team?

...[A] Financial Review Team...conduct[s] a more detailed review of the financial condition of the unit of local government. A Financial Review Team generally has 60 days (generally 30 days in the case of school districts) to complete its work and file its report. A Financial Review Team report must reach one of the following three conclusions:

-- A serious financial problem does not exist in the unit of local government, or

-- A serious financial problem exists in the unit of local government, but a Consent Agreement containing a plan to resolve the problem has been adopted, or

-- A local government financial emergency exists because no satisfactory plan exists to resolve the serious financial problem.

If the third conclusion is reached, or if a unit of local government signs, but subsequently violates a Consent Agreement, then a financial emergency is determined to exist in the unit of local government and an Emergency Financial Manager is appointed.

Who appoints Emergency Financial Managers?

For units of local government other than school districts, Emergency Financial Managers are appointed by, and serve at the pleasure of, the Local Emergency Financial Assistance Loan Board, which consists of the State Treasurer, the Director of the Department of Management and Budget, and the Director of the Department of Energy, Labor and Economic Growth. Emergency Financial Managers for school districts are appointed by the Governor, subject to the advice and consent of the State Senate

 

New Powers for EMFs

But a bill passed by the Michigan Senate this week expands the Emergency Financial Managers' powers to include ending union-approved contracts. Holland radio station WHTC reports:

After days of debate and protests, the State Senate passes a bill to give more power to emergency financial managers appointed to cities or school districts.  The 26-to-12 vote, which followed party lines, will allow emergency managers to cancel workers union contracts.

Democrats have said passing the bill would undermine collective bargaining in the affected communities or schools, while Republicans contend the legislation would help target municipalities or districts before their financial problems reach critical levels.

Six localities or school districts are currently affected by the law. From the Chicago Tribune:

The current state law related to emergency financial managers is affecting about a half-dozen local communities and schools at this time. Only Pontiac, Benton Harbor, Ecorse and the Detroit Public Schools have state-appointed emergency financial managers in place.

The bill has passed the House and the Senate and is on its way back to the House, where approval is required for some minor changes.

-Brian Short, Michigan Radio News