State of Fiscal Emergency

To say the states of the Union are facing fiscal problems would be an understatement. With nearly every state in the country facing serious budget deficits as the recession takes its toll and stimulus funds drying up states are doing whatever they can to stay above water. Whether through steep cuts in spending in Texas, structural reforms in California, or weakening public unions in the Midwest all are united in their search for an answer. Nowhere is a more radical effort being waged than in the state of Michigan.

The Republican-controlled Michigan State Senate recently passed a highly controversial bill to address the fiscal crises facing state. In the name of fiscal responsibility a group of state officials appointed by the governor known as emergency financial maangers would gain virtually unchecked power over all aspects of the local government in their charge. Some argue thesepowers are necessary to address the multitude of fiscal problems in Michigan by giving the emergency managers the extra leverage needed to get the job done. As they see it emergency managers are necessary to clean up the state’s problems and they have been used successfully in Michigan previously. This does not answer the question of if the new powers, or the changes to process, go too far.

The first line crossed is in the process of declaring a state of fiscal emergency. The Local Government and School District Fiscal Accountability Act grants a considerable amount of unchecked power to the governor’s office. In the new bill the governor would have the final say on if a local government is in a state of fiscal emergencyⁱ. The governor have the sole power to appoint the emergency manager with no outside review or confirmationⁱⁱ. The new manager, once appointed, could only be removed by the governor or impeachmentⁱⁱⁱ. The law goes further by giving emergency managers full immunity from any legal liability^iv.

So why would the emergency managers need protection from legal sanction? The Fiscal Accountability Act gives the emergency managers unprecedented authority over their municipalities. The list of powers given to the managers is staggering in its breadth and scope. Once in place there is little the emergency managers cannot do. From the outset they completely control the process being given the sole responsibility of developing the financial plan for the municipality^v. The plan does not need any outside approval of any kind; the public has no opportunity to vote on the issue. The state fiscal emergency remains until the emergency manager declares the crisis has been resolved^vi.

During this time the manager is charged to issue “all orders necessary” to make the plan happen^vii. This is backed up by substantial authority explicitly spelled out in the bill. The manager is given the power to create the budget^viii, sell or transfer local government assets^ix, and remove non-elected local officials^x at their sole discretion. They handle all contract negotiations and, at their discretion, can unilaterally terminate them^xi. If a manager is put in charge of a school district they are given the power to set their educational plan^xii. Any municipal official deemed by the emergency manager to have “not reasonably” carried out an order can be barred from access to municipal facilities, mail, and internal information^xiii. In spite of being in a state of fiscal emergency the municipality is required to foot the bill for the emergency manager’s pay, expenses, and staff for the duration^xiv.

These powers, while staggering in their totality, are not the most potent they receive. With the approval of the state treasurer they can waive any need for competitive bidding on any contract over $50,000^xv. Based on their sole discretion and judgment they can recommend the municipality be declared a debtor and placed under their complete control^xvi or worse yet be legally dissolved^xvii. The governor alone makes the final call. Most astonishingly the law makes legal appeal of any of these actions impossible. The only chance given to the local government is during the investigation process which requires the municipality to request appeal with a 2/3rds majority vote^xviii. Once an emergency manager is appointed the locals have no legal recourse between the manager’s legal immunity and the law’s restrictions.

What is happening in Michigan could be waved away as unique, radical measure born of an economically devastated and desperate state. It could be argued given Michigan’s genuinely terrible situation extreme action might be justified. This all assumes that what happens in one state will remain in one state. Currently 44 of the 50 states of the Union are facing serious fiscal problems. While Michigan’s situation is especially grim they are not the only state with local governments facing serious deficits. We have already seen how Scott Walker’s union-busting bill in Wisconsin has been copied in Indiana, Ohio, Iowa, Tennessee, and is being seriously considered in Maine. Public outcry proved, in the short term, to be in vain in Wisconsin and other governors press ahead in spite of the lack of popular support. If Michigan puts this law into effect what would stop other states from considering their own version of the Michigan solution?

Also published at Ryan’s Desk