Archive for March 10th, 2011

Despite trying to keep ahold of ten tigers tails in both my personal and professional life, I still find some moments here and there to log on to Facebook, and keep up with friends and family.  Today, I did so to find some family and friends posting this clip and crying about fascism, dictators, class warfare, and how it was threatening to democracy.  My curiosity was peaked, so I decided to take one for the team and watch the Maddow clip.  While I feel dumber and insulted for the experience, I’m still glad I did, because, as is the case with many such complaints, there is more to the story than what is presented.

I’m sorry, but in order to follow along, you have to watch.  Closing your eyes helps.

Done?  Great. 

Let’s proceed.

The family member’s post referred to this as being akin to a “dictator” because the emergency manager appointed by the state could void union contracts and strip the local elected officials of their power.  If that was all I knew, I might share some alarm, but having grown up in Michigan, I could recall that the state took over the City of Flint, and stripped the local elected officials of authority at the time.  I got on google to confirm this, and found an article about it on the World Socialist Website as the first hit in the search.  The article, dated November 16, 2002 states:

Flint, Michigan, the fourth largest city in the state with a population of 125,000, is in receivership. The municipal government in the former center of the General Motors auto empire has been plunged into bankruptcy as a result of successive plant closures, capped by the recent shutdown of the Buick City complex.


In May of 2002, Republican Governor John Engler declared a financial state of emergency in Flint and began proceedings to implement a state takeover. Engler named Ed Kurtz, former president of a private business college, to oversee Flint’s finances.

On August 20, the Michigan Court of Appeals overturned a lower court ruling that had temporarily halted a takeover by the state. A September 14 court ruling reaffirmed this decision, effectively ending attempts by the city council to block the takeover.

Since then Kurtz has proposed draconian budget cuts in an effort to erase a $40 million deficit. The cuts come at a time when Flint’s social services and infrastructure are already in a state of near-collapse. Among the proposals under consideration are layoffs of firefighters, the closure of community centers and cuts in trash collection.

So it sounds to me like there was already a legal basis for the state to “takeover” municipalities, and make financial decisions in the stead of local elected officials.  I noted that this occurred when the city was in receivership which is a nice way of saying “bankruptcy”.

The other notable takeaway from the story is that a mayor in his third term was unable (or unwilling) to come to terms with mounting deficits.  If only the taxpayers who continued to elect this mayor were the ones affected by his incompetence, this wouldn’t be an issue.  However, the state of Michigan shares property tax revenue with cities throughout the state, so Flint’s budget deficits didn’t affect just Flint residents; it affected all state taxpayers.

Of course, this still doesn’t tell me what law the state relied on before, or how what is now being proposed is different, so I kept digging.  The next helpful clue I found was this story by Michael P. McConnell of the Daily Tribune.  The Tribune article described more about what the state is currently up to.  One useful passage:

The GOP-dominated state House this week passed major revisions to the emergency financial manager law, Public Act 72, which would allow the state to take over a community’s operations before it goes into receivership. The revisions, which have yet to be passed by the state Senate, also grant emergency financial managers more authority to nullify union contracts and dissolve city councils.

So I glean that:

a)  There is an emergency financial manager law already in effect;

b)   And the proposal gives the emergency managers more power to nullify union contracts and dissolve city councils. [Emphasis Mine]

Back to the Search Engine.  The law in question, Public Act 72 of 1990 already provided the governor with the ability to declare a financial emergency in a local unit of government, upon recommendation of a review team which investigates and issues recommendations.  The state treasury provides a great summary of how this process works here.   And keep in mind, the overall bill was made law back in 1990.  There have been some amendments in intervening years, but the end results that I see my family and friends complaining of have already been in place, and used in cities such as Flint, Benton Harbor, and others.

So I decided to look at the text of the law currently in place.  One subsection that jumped out at me:

141.1221 Additional actions by emergency financial manager. 

Sec. 21.

(1) An emergency financial manager may take 1 or more of the following additional actions with respect to a unit of local government in which a financial emergency has been determined to exist: 

(p) Exercise the authority and responsibilities of the chief administrative officer and governing body concerning the adoption, amendment, and enforcement of ordinances or resolutions affecting the financial condition of the unit of local government as provided in the following acts:

(i) The home rule city act, 1909 PA 279, MCL 117.1 to 117.38.

(ii) The fourth class city act, 1895 PA 215, MCL 81.1 to 113.20.

(iii) The charter township act, 1947 PA 359, MCL 42.1 to 42.34.

(iv) 1851 PA 156, MCL 46.1 to 46.32.

(v) 1966 PA 293, MCL 45.501 to 45.521.

(vi) The general law village act, 1895 PA 3, MCL 61.1 to 74.25.

(vii) The home rule village act, 1909 PA 278, MCL 78.1 to 78.28.

(q) Reduce, suspend, or eliminate the salary, or other compensation of the chief administrative officer and members of the governing body of the unit of local government during the financial emergency. This subdivision does not authorize an emergency financial manager to impair vested retirement benefits. If an emergency financial manager has reduced, suspended, or eliminated the salary or other compensation of the chief administrative officer and members of the governing body of a unit of local government before the effective date of the amendatory act that added this subdivision, the reduction, suspension, or elimination is valid to the same extent had it occurred after the effective date of the amendatory act that added this subdivision.

Which would pretty much cover stripping local elected officials of their authority already.  Check.  To start at the beginning of the Act as it currently exists, start here.

So what does the new bill change?

One explanation is in Craine’s Detroit:

Here’s how the existing law works: A review of a city or school district’s finances is triggered when one of several events happens, like payless paydays or a failure to meet pension obligations. The state treasurer puts a review panel in place to evaluate the local government’s fiscal health, and if there’s a financial emergency, an emergency manager is appointed.

Amendments to state law under discussion include expanding the list of events that can trigger the state review that leads to installation of an emergency manager, changing the powers of local elected officials during the emergency financial manager’s tenure, giving an emergency manager the power to modify or terminate labor contracts, allowing an emergency manager to consolidate or eliminate departments and allowing a current or recent elected official to serve as emergency manager.• Under the existing law, an emergency manager can renegotiate union contracts but not break them. The amendment would place some restrictions on the emergency manager’s ability to break contracts, namely, to prove it’s necessary, based on the financial emergency and the good of the public. Contract modifications would be temporary.

I found the article useful because it presented the potential challenges, and discussed the pros and cons of the proposed legislation without the end of the world hyperbole that Butch put on the story.  The bills which have passed the House are HB4214-HB4218.  I decided to see if I could find where the emergency manager now had the authority to disincorporate cities.  I found it on-line 7, page 32 of HB 4214.

(cc) For municipal governments, disincorporate or dissolve the municipal government and assign its assets, debts, and liabilities as provided by law.

Of course, there are objective limitations on the use of this power that are enumerated in the bill.  It isn’t the arbitrary whim that Butch alleges.  But then, I’m sure that this was just an oversight on her part.

And for those who still want to ascribe sinister motives to the law, I direct you to the findings of the legislature when the law was initially passed in 1990:

141.1202 Legislative determinations. 

Sec. 2.

The legislature hereby determines that the public health and welfare of the citizens of this state would be adversely affected by the insolvency of units of local government, including certain school districts, and that the survival of units of local government is vitally necessary to the interests of the people of this state to provide necessary governmental services. The legislature further determines that it is vitally necessary to protect the credit of the state and its political subdivisions and that it is a valid public purpose for the state to take action and to assist a unit of local government in a fiscal emergency situation to remedy this emergency situation by requiring prudent fiscal management. The legislature, therefore, determines that the authority and powers conferred by this act constitute a necessary program and serve a valid public purpose.

There really is a reason for it.  If municipalities and school districts are so mismanaged that they cannot afford to provide the basic services that they are supposed to provide, then the state can and should step in to put that entity back in a place where it CAN provide those services.   Many of the powers decried as harbingers of fascism and dictatorship already existed.  The change that I predict is the most likely to be used is the power to void collectively bargained contracts, and frankly this doesn’t trouble me.  For years, public sector unions have used collective bargaining to the taxpayers detriment.   These public servants aren’t competing with other people for the job, and yet they have an enormous club at their disposal in the form of collective bargaining, and they could come to the table secure in the knowledge of two very salient facts.

One, the unions know that the people they are bargaining with aren’t using their own money; they are using everyone’s money.  (And the government officials negotiating with the unions know this too.)

Two, the unions have often made VERY generous contributions to the election campaigns of the people they will be facing across the negotiating table.  This would be a little like you or I buying the boss his job before we sat down to talk about the terms and conditions of our employment.

Unfortunately, the problem with these kinds of arrangements is that even other people’s money is a finite resource, as state and local governments across the land are starting to figure out.

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