Commentary
1:06 pm
Thu February 24, 2011

Emergency Financial Managers

If you had any doubts about how difficult the situation is for local governments these days, consider this. Even before they tackle the budget, our lawmakers in Lansing have been working hard on new emergency financial manager legislation.

Yesterday, the Michigan House of Representatives passed a package of bills designed to make it easier to appoint emergency financial managers to run troubled cities and school districts.  The legislation also gives those managers broad new powers. The Senate is expected to easily approve this as well.

There was a lot of heated debate, but what was left mostly unspoken was the real reason they want this done quickly. They believe the state will have to appoint more emergency financial managers before long. Last month, state treasurer Andy Dillon said five communities may not be able to pay their employees by the end of March. And that may be only the tip of the iceberg.

The state has been appointing emergency financial managers for some time, and in some cases, with good results. There is general agreement that an EFM helped Hamtramck get back on its feet a decade ago, though the city is in trouble again now.

There are a number of them currently in place in cities that include Benton Harbor and Pontiac, and the Detroit Public Schools. But how far should their powers extend?

Robert Bobb, the EFM over Detroit’s schools, have expressed frustration that the courts have ruled his powers don’t extend to academic matters. Other people are worried, however, that the new emergency financial manager legislation will give the state too much power. Specifically, residents of troubled older cities, which tend to be heavily Democratic, fear Lansing Republicans will use this to seize power in places where they could never win it on their own.

There’s a racial element to this too. State Representative Maureen Stapleton of Detroit yesterday complained that the emergency manager law was most likely to be used in “communities of color.” Unions are, if possible, even more upset. The new legislation would allow an emergency financial manager to void labor contracts, require competitive bidding and strip local officials of virtually all their power.

All this passed the house on an essentially party-line vote yesterday. The bill’s supporters say color and politics don’t have anything to do with it. They say this is about nipping crises in the bud.

In fact, the legislation’s main sponsor, Republican Al Pscholka of Stevensville, said we should see this as “tough love” designed to encourage communities to make the difficult choices necessary to avoid a state takeover.

However, this could have the opposite effect. Rather than take the heat for tough decisions, local authorities may throw up their hands and ask for a financial manager to do the dirty work.

That’s already happened in Pontiac. Sadly, these bills are  probably largely necessary. That doesn’t mean this legislation is perfect. A Democratic lawmaker from Oakland County named Lisa Brown had some legitimate criticism. She noted that some communities have been driven to the brink partly because they’ve been denied adequate revenue sharing and school aid.

The lawmakers, she said, “need to take responsibility for what you do in this room.” That’s good advice for all of us in these times.