Financial emergency in Michigan

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Financial emergency is a state of receivership for Michigan State local governments.

History[edit]

The financial emergency status, along with the Emergency Financial Manager (EFM) position, was first created in Public Act 101 of 1988 for the specific emergency in Hamtramck, MI. Public Act 101 was amended by Public Act 72 of 1990, allowing an Emergency Financial Manager to be appointed for any local governmental unit. PA 72 in turn was replaced by Public Act 4 of 2011, which renamed the position to Emergency Manager (EM) and gave the Manager additional authority.[1]

Detroit Public Schools also operated under a separate state control arrangement from 1999 through 2005 under Public Act 10 of 1999 during the John Engler administration.[2]

When the Referendum petitions were approved by the state Board of Canvassers on August 8, 2012 under orders from the Michigan Supreme Court, PA 4 was suspended and the previous version was reinstated.[3] All current EM except for Micheal Brown in Flint were reappointed as EFM by the Local Emergency Financial Assistance Loan Board. Brown was previously a Flint City employee in the past five years and was not eligible under PA 72 to be an EFM.[4] The Sugar Law Center filed to challenge PA 4 and PA 72. PA 4 was repealed by Michigan voters in the 2012 general election,[5] and the Michigan Legislature subsequently passed Public Act 436 of 2012 to replace the revived Public Act 72.[6]

On May 1, 2013, the City of Ecorse was moved from under an emergency manager to a transition advisory board, which includes the previous emergency manager.[7] On July 2, a school district dissolution provision was passed into law allowing financially struggling school districts to be dissolved.[8] On July 18 with the Governor's authorization, Detroit's manager filed Chapter 9 bankruptcy.[9] In August, a transition advisory board was appointed for the City of Pontiac which included the then emergency manager.[10]

School district dissolution[edit]

On July 2, 2013, a school district dissolution provision was passed into law allowing school districts that are financially struggling to be dissolved [11] by the state treasurer and state superintendent[12] with the intermediate school district splitting up the district's territory between neighboring school districts.[13] Dissolved school districts become a tax-collecting unit, under the intermediate school district's control, to pay off debts.[14]

Dissolved school districts

Procedure[edit]

Original law[edit]

Triggers for an initial review included: failure to pay debts, failure to pay employee salaries, a request by local residents or officials, or request by a state legislator or state treasurer. If the review found that a financial emergency existed, the Local Emergency Financial Assistance Loan Board would make the appointment of an emergency financial manager for the governmental unit.[1]

Public Act 4 of 2011[edit]

Public Act 4 amended and expanded the procedure. The Michigan Department of Treasury would conduct a preliminary examination of troubled local governments. If “probable financial stress" were found, a financial review would be ordered. The Governor of Michigan and other officials would appoint the eight members of a financial review panel, which could report back to the Governor indicating that the local government is in "mild financial stress, severe financial stress or a financial emergency"[16] within 60 days. If a financial emergency existed but local officials had a viable plan to correct the situation, then the panel could recommend a consent agreement. Otherwise, the panel could recommend an emergency manager to take control of the local government.[17] The Governor was given 10 days after the panel reported its findings to choose an option.[16] The local government then had seven days to request a hearing by the Governor or his designee to appeal the decision.[17] Local governments were required to pay the emergency manager.[18]

Public Act 436 of 2012[edit]

The Local Financial Stability and Choice Act of 2012 includes several triggers for a preliminary review:

  • board requesting a review via resolution,
  • local petition of 5 percent of gubernatorial election voters requesting one,
  • creditor's written request,
  • missed payroll
  • missed pension payments
  • deficit-elimination plan breach or lack of a such a plan within 30 days after its due day
  • a legislative request.[19]

As with the previous law, various reviews are taken. If the review finds a financial emergency exists, the local government is given four different choices: a consent agreement, chapter 9 bankruptcy, mediation or emergency manager.[6] Under this law, the State government pays the manager's pay under this version.[18] If an emergency manager is appointed, when the manager files his plan with the state, the local governing board may propose an alternative plan which the Local Emergency Financial Board will select which version the manager will implement. After one year, the manager may be remove by a 2/3 votes of the governing body.[6]

A "transition advisory board" may be appointed after an emergency manager leaves a governmental unit and is to oversee the unit's finances.[20] The law also allows the governor to impose a model charter or revise the existing one before the municipality exits receivership.[21]

Local Emergency Financial Assistance Loan Board[edit]

The Local Emergency Financial Assistance Loan Board is ex officio formed board consisting of the State Treasurer of Michigan, director of licensing and regulatory affairs and the Director of Technology, Management and Budget as members. The Board selects the emergency manager and chooses between the emergency manager's cost cutting plan and the local unit board's alternative plan.[6]

Emergency Manager[edit]

An emergency manager, formerly emergency financial manager, is an official appointed by the Governor to take control of a local government under a financial emergency. A manager temporarily supplants the governing body, chief executive officer and/or chief administrative officer of the local government with the ability to remove any of the unit's elected officials. Managers have complete control over the local unit with the ability to reduce pay, outsource work, reorganize departments and modify employee contracts.[22] Emergency managers assigned to school districts may transfer failing schools to the Education Achievement Authority.[23]

List of Emergency Managers[edit]

Local Government Term Manager Governor
City of Allen Park Oct 2012–present Joyce A. Parker Rick Snyder[24]
City of Benton Harbor Apr 2010 - Jan 2013 Joseph Harris Jennifer Granholm
Jan 2013–present Tony Saunders Rick Snyder[25][26]
City of Detroit Mar 2013–present Kevyn Orr Rick Snyder[27]
City of Ecorse Oct 2009 - Apr 2013 Joyce A. Parker Jennifer Granholm
City of Flint Jul 2002 - Jun 2004 Ed Kurtz John Engler
Dec 2011 - Aug 2012 Michael Brown Rick Snyder
Aug 2012 - July 2013 Ed Kurtz Rick Snyder
July 2013 - October 2013 Michael Brown Rick Snyder
October 2013 - present Darnell Earley Rick Snyder[28]
Hamtramck City December 2000[29]- Feb 2007 Louis Schimmel John Engler[30]
July 2013 – present Cathy Square Rick Snyder
City of Highland Park Dec 2000 - Mar 2005 Ramona Henderson Pearson John Engler[31]
Mar 2005 - Apr 2009 Arthur Blackwell Jennifer Granholm[32]
Apr 2009 - Jul 2009 Robert Mason Jennifer Granholm[33]
City of Pontiac Aug 2010 - Oct 2011 Michael Stampfler Jennifer Granholm
Oct 2011 - August 2013 Louis Schimmel Rick Snyder[22]
Three Oaks Village December 2008[29]-
Detroit Public Schools Mar 2009 - May 2011 Robert Bobb Jennifer Granholm[34]
May 2011 – present Roy Roberts Rick Snyder[35]
Muskegon Heights School District April 2012 - present Donald Weatherspoon Rick Snyder[36]
Highland Park Schools Jan 2012–present Jack Martin Rick Snyder[37]
October 2012 - present Donald Weatherspoon Rick Snyder[24]

Other[edit]

  • Bankruptcy
    • Detroit (in addition to emergency manager) July 21, 2013-[9]
  • Consent agreements
  • Under review
  • Transition advisory board
    • Ecorse, May 1, 2013-[7]
    • City of Pontiac, August 2013-[10]

See also[edit]

References[edit]

  1. ^ a b "7 things to know about Michigan's emergency manager law". Michigan Radio. December 6, 2011. Retrieved 30 January 2013. 
  2. ^ Takeover of Detroit Schools Shows Few Intended Results
  3. ^ Anders, Melissa (August 8, 2012). "Emergency manager law officially suspended as referendum is certified for the November ballot". MLive.com. Retrieved 30 January 2013. 
  4. ^ Longley, Kristin (August 8, 2012). "Ed Kurtz returns as new Flint emergency financial manager; Loan Board reappoints EFMs in 3 other cities". The Flint Journal. Retrieved 30 January 2013. 
  5. ^ Oosting, Jonathan (November 11, 2012). "Michigan emergency manager law: What's next after Public Act 4 repeal?". MLive.com. Retrieved 30 January 2013. 
  6. ^ a b c d Oosting, Jonathan (December 27, 2012). "Snyder signs replacement emergency manager law: We 'heard, recognized and respected' will of voters". MLive.com. Retrieved 30 January 2013. 
  7. ^ a b AlHajal, Khalil (April 30, 2013). "Ecorse escapes emergency manager, but state keeps oversight indefinitely". Mlive Media Group. Retrieved October 18, 2013. 
  8. ^ Struggling school districts can be dissolved under new law . Michigan Radio. Accessed on November 19, 2013.
  9. ^ a b AlHajal, Khalil (July 18, 2013). "Detroit pursues Chapter 9 municipal bankruptcy". Mlive.com. Retrieved 21 July 2013. 
  10. ^ a b AlHajal, Khalil (August 19, 2013). "Advisory board replaces emergency manager in Pontiacy". Mlive Media Group. Retrieved October 18, 2013. 
  11. ^ Struggling school districts can be dissolved under new law. Michigan Radio. Accessed on November 19, 2013.
  12. ^ Knake, Lindsay. (July 18, 2013). Buena Vista schools partners with charter company Leona Group as possible dissolution looms. The Saginaw News. Retrieved on August 16, 2013.
  13. ^ a b Burns, Candace. (July 31, 2013) SISD officially dissolves Buena Vista schools. ABC12. Retrieved on August 16, 2013.
  14. ^ Knake, Lindsay. (July 11, 2013) Buena Vista School District could keep collecting taxes after dissolution to repay debt. The Saginaw News. Retrieved on August 16, 2013.
  15. ^ Smith, Brian. "Inkster schools first to be dissolved; students split across 4 districts." Mlive. July 26, 2013. Retrieved on November 2, 2013.
  16. ^ a b Longley, Kristin (November 4, 2011). "State panel reviewing Flint's finances asks for up to 30 more days". Flint Journal. Retrieved 30 November 2011. 
  17. ^ a b Longley, Kristin (November 8, 2011). "State review panel recommends emergency financial manager be appointed in Flint". Flint Journal. Retrieved 30 November 2011. 
  18. ^ a b Oosting, Jonathan (December 11, 2012). "Replacement emergency manager law, like right to work, would be immune from Michigan voter referendum". Retrieved 21 July 2013. 
  19. ^ Knake, Lindsay. (May 02, 2013) Michigan Department of Education: Too early to tell what will happen to Saginaw County's Buena Vista School District. The Saginaw News. Retrieved on September 4, 2013.
  20. ^ Longley, Kristin. (January 22, 201) [ Flint City Council letter to Gov. Snyder: 'We are on the wrong path' with emergency manager]. Mlive Media Group: The Flint Journal. Accessed on October 18, 2013.
  21. ^ Adams, Dominic. (September 22, 2013) Uncharted waters: Next Flint emergency manager could radically change the way city is run. Mlive Media Group: The Flint Journal. Accessed on October 18, 2013.
  22. ^ a b Longley, Kristin (November 18, 2011). "Other emergency managers provide glimpse of what Flint can expect under state takeover". Flint Journal. Retrieved 30 November 2011. 
  23. ^ Higgins, Lori (Dec 4, 2011). "State district for failing schools may expand past DPS earlier than planned". Detroit Free Press. Retrieved 5 December 2011. 
  24. ^ a b Moore, Lynn (October 25, 2012). "Highland Park Schools added to Muskegon Heights emergency manager's responsibilities". Muskegon Chronicle. Retrieved 21 July 2013. 
  25. ^ http://www.michigan.gov/treasury/0,4679,7-121-1755_1963-292933--,00.html
  26. ^ Stanton, Terry (January 11, 2013). "Emergency Loan Board Appoints Tony Saunders II Successor-Emergency Financial Manager in Benton Harbor?". Michigan.gov. 
  27. ^ Livengood, Chad (March 14, 2013). "Snyder expected to name Kevyn Orr Detroit EM From The Detroit News: http://www.detroitnews.com/article/20130314/POLITICS02/303140387#ixzz2NdyZ1bWS". Detroit Free Press (Detroit). Retrieved 15 March 2013. 
  28. ^ Adams, Dominic. (September 11, 201) Darnell Earley promises bold steps as Flint emergency manager. MLive Media Group: The Flint Journal. Accessed on October 18, 2013.
  29. ^ a b Past Financial Emergency Information. State of Michigan: Department of Treasury. Accessed on November 4, 2013
  30. ^ [1]
  31. ^ "State Will Manage Highland Park's Finances". WDIV-TV. 2000-12-06. Retrieved 2010-01-11. 
  32. ^ "Mason Named Highland Park Financial Manager." Department of Treasury. April 18, 2009. Retrieved on April 29, 2009.
  33. ^ Treasury EFM Robert Mason Transfers Control Back to Highland Park, Pressbox Press Release, July 17, 2009
  34. ^ Duggan, Daniel (November 4, 2009). "Freman Hendrix asked about Detroit Public Schools' $13 million lease in 2001". Crain's Detroit Business. Retrieved November 7, 2009. 
  35. ^ Chambers, Jennifer (November 28, 2011). "Official revives DPS fight". The Detroit News. Retrieved 5 December 2011. 
  36. ^ Moore, Lynn (April 19, 2012). "Governor names emergency manager for Muskegon Heights Public Schools". Muskegon Chronicle. Retrieved 21 July 2013. 
  37. ^ Foley, Aaron (February 2, 2012). "From state-of-the-art to state takeover: The rise and fall of Highland Park Public Schools". mlive.com. Retrieved 2 February 2012. 
  38. ^ Oosting, Jonathan. (March 09, 2012) Gov. Snyder approves consent agreement -- not emergency manager -- for Inkster. Mlive.com. Accessed on November 3, 2013.
  39. ^ Oosting, Jonathan. (March 13, 2012) State Treasury to present Detroit City Council with language of proposed consent agreement. Mlive.com. Accessed on November 3, 2013.
  40. ^ a b Emergency Manager Information. Michigan Department of Treasury. Accessed on November 4, 2013.