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How did we get here? A look back at Michigan's emergency manager law

Feb 3, 2016

Credit Steve Carmody/Michigan Radio

The state of Michigan’s emergency manager law has received considerable criticism in the wake of the Flint water crisis. The concept of the state moving in to take power away from local officials to fix a financial crisis is not new. In fact, Public Act 72, known as the Local Government Fiscal Responsibility Act, was passed in 1990.

But how did we get from the Local Government Fiscal Responsibility Act, passed when Democratic Gov. James Blanchard was in office, to the latest edition of the Gov. Rick Snyder emergency manager law?

Michigan State University economist Eric Scorsone, who is the founding director of the MSU Extension Center for Local Government Finance and Policy, joined Stateside to take a look back at Michigan’s history of the emergency manager law.

According to Scorsone, the origin of this law comes from the legal precedent that local government is a branch of Michigan’s state government. So, in a way, an emergency manager is just acting to solve a problem area within the state government.

According to Scorsone, Public Act 72 was rarely used in the approximately 20 years it was in effect through the administrations of Gov. John Engler and Gov. Jennifer Granholm. When Snyder took office, one of the first bills that he signed in 2011 was Public Act 4, which Scorsone says was a “beefed-up” emergency manager law.

Michigan voters rejected that law by referendum in 2012, only to see a new bill passed, PA 436, a month later. The new version made some changes to the original version, including requiring the state to pay the salary of the EM, rather than the cash-strapped local government they were appointed to rescue, and giving the local government the power to vote out the EM after 18 months. The most controversial change made to PA 436 was that it stipulated that the public could not repeal it.

Another feature that was added to the current bill is that local governments are now given four choices of how they want to proceed once the governor has declared them an “emergency” situation. The communities can choose between a consent agreement, which keeps local officials in charge but with constraints, neutral evaluation which is like a pre-bankruptcy process, filing for bankruptcy directly, and having an emergency manager appointed.

“The thought behind it is ‘we need some policy, we had a lot of financial distress,’ and so the idea was to give these communities a choice of which of the options they wanted to use,” said Scorsone. “That maybe was felt to be different than the Public Act 4 that was rejected. I can understand the critique of that.”

However, while the local governments are given the power to choose, Scorsone says it’s a not a true choice.

“The choice is a little constrained, to be truthful about it,” said Scorsone. “If you really carefully read PA 436, what you actually find is that a local government can choose consent agreement, for example, but actually the state treasurer has to agree that that is the right approach. If they don’t agree, they can force them to go back to one of the other options. So it is a choice, but perhaps a bit of a constrained choice.”

The liability of the emergency managers and the decisions they make will be a major issue as the Flint water crisis continues to be investigated. How responsible can they be held for making the wrong calls and what happens when a lawsuit is brought forth?

“The law is pretty clear that the emergency manager is acting in a way that does provide some governmental immunity,” said Scorsone. “The emergency manager, if there’s a claim against them, has to be defended by the Attorney General. That was fairly new to these new emergency manager laws. The city actually has to pay the legal bills of what the Attorney General incurs and it’s certainly true that there is a degree of immunity provided to that emergency manager, and I suppose the rationale would be that they want some kind of protection because they are making these difficult decisions. But I think this issue is going to be tested in the Flint case to see how that really plays out.”

There has been plenty of media coverage of Michigan’s emergency manager law, but out of everything he has seen, Scorsone was asked what he feels are the biggest flaws of the EM system.

“The theory is that the state can do it better,” said Scorsone. “The state can take over the local government and run it better and provide the expertise, and that clearly didn’t work in the Flint case. The situation is epically wrong, perhaps, but this is clearly a case of where we have to ask the question why did it go wrong, and I think it’s a complex answer, but one of the things that needs to be done … we need a better relationship between state and local government.”

Listen to the full interview to hear more about the process and whether Scorsone believes the EM law should be repealed or if it just needs to be reevaluated.