financial crisis

Michigan State University

The latest Michigan community to fall into financial collapse is the tiny half-square mile community of Royal Oak Township, in Oakland County.

Late last month, Gov. Rick Snyder confirmed a financial emergency existed in Royal Oak Township. That cleared the way for action under Michigan's overhauled emergency manager act, PA 436.

What's happened in Royal Oak Township illustrates the changes and options available under PA 436 after voters rejected the previous emergency manager law in November 2012. We wondered if other communities can learn cautionary lessons from the financial troubles of Royal Oak Township.

Eric Scorsone, municipal finance expert from Michigan State University, joined us today.

Listen to the full interview above.

It’s hard to be shocked by anything relating to Detroit’s financial crisis. But frankly, I was, when I read the details of the report Emergency Manager Kevyn Orr gave to the city’s creditors.

For months, we’d been hearing that the city had as much as $14 billion in long-term debt. The real figure is more like twenty billion. No other city in the country pays even twenty percent of its revenue for what they call legacy costs -- debt service and pensions. Detroit pays more than forty percent.

User: Brother O'Mara / flickr

City of Hamtramck facing a financial emergency

Following a state review, Governor Snyder has confirmed that the city of Hamtramck faces a financial emergency.

“In 2010, city officials asked to file for bankruptcy. And they asked for this state review, too — which found the city is still running continuous deficits, and can’t make pension payments on time…. The city could get an emergency manager. But Hamtramck officials potentially have other options, including a consent agreement or mediation,” reports Michigan Radio’s Sarah Cwiek.

Terry Lynn Land to run for U.S. Senate

“Former Secretary of State Terri Lynn Land is the first Republican to announce she’s running for Michigan’s open U.S. Senate seat. Land is also a Republican National Committeewoman. There could be other candidates waiting in the wings. But Land says the eventual Republican nominee will need the next two summers to raise money, and get out a winning message,” Rick Pluta reports.

Feds dismiss complaint against American Indian mascots

The U.S. Department of Education has dismissed a complaint from the Michigan Department of Civil Rights over schools’ use of American Indian mascots. The civil rights department had argued that the images hurt Native American students’ academic performance, and create an unequal learning environment. But federal education officials say opponents of Indian mascots and logos need to prove that they create a hostile environment for Native American students,” Michigan Radio’s Sarah Hulett reports. 

Sarah Hulett / Michigan Radio

Update 4:58 pm:

State Treasurer Andy Dillon says the district’s money problems are deep and troubling. He says the state will advance the school district $188,000 so it can meet payroll tomorrow. 

"I have no comfort that the district has a handle on their finances," said Dillon. "The numbers move hourly. We have three people down there today trying to get a handle on how much they actually need for payroll. And I’m very uneasy about it, because I can’t tell you in the middle of February that they’re going to make payroll."

But school board member Robert Davis says the state has contributed to the district’s financial woes by requiring that it close a career academy that enrolled 1,500 students.

"Their plan and intent is to fold the Highland park School system into the Detroit Public School system," Davis said. "That’s what this is all about."

Highland Park Schools' student population has declined 58% percent since 2006. 

State officials say their objective is to keep the district’s doors open through the end of the year. But they say that will be difficult. The district needs a cash infusion of at least $3 million to get through the school year. But the maximum the state is allowed to advance under hardship cases is $2 million.

The district's cumulative deficit is $11.3 million. That’s about $10,000 for every student enrolled.

12:56 p.m.

Governor Rick Snyder has declared a financial emergency in the Highland Park school district, Rick Pluta reports. The district will have a chance to challenge the finding at a January 17th hearing before the governor names an emergency manager.

In a statement released today, the Governor says:

“It is critical that students in the Highland Park School District get the education they need and deserve. For that to continue, the Highland Park School District must have stable finances. Through the comprehensive reviews that have been conducted, it is clear the district faces monumental financial challenges.”

On January 4th a state review  panel recommended the governor appoint an emergency manager to fix the school district’s "financial emergency." The financial review team had been looking at the Highland Park School District’s books since November. Earlier this month, Steve Carmody reported:

The panel’s report to the governor finds the school district is $11 million in the red. That works out to about $10 thousand for every student enrolled.  The school district’s deficit has grown by $3 million in just the last year. The school district’s debt has grown, as its student population has fallen. Nearly 3,200 students attended Highland Park schools in 2006. This year, fewer than a thousand students are enrolled.

Emergency managers are already running the Detroit public schools,  as well as the cities of Flint, Pontiac, Ecorse and Benton Harbor. Financial review teams are also looking at Detroit and Inkster's books.