Howes: Tar Heel state offers smart lesson for Michigan

Daniel Howes
The Detroit News

Michigan’s political ecosystem doesn’t have a history of learning well from others. Given its looming fiscal stress, now’d be a good time to shed its arrogance and start.

Take North Carolina. Back in 1931, in the throes of the Great Depression, the Tar Heel state’s local governments trailed only Florida in the number of municipalities defaulting on their debt. By 1933, 62 counties, 152 cities and towns, and roughly 200 special districts were in default on the principal or interest payments.

That’s when a new idea — North Carolina’s Local Government Commission — was born. And 86 years on, the creation endures. It is credited with ensuring a brand of fiscal responsibility more than a few Michigan cities need, provided they could relinquish the precious “local control” that too often results in bad decisions and plain ol’ bad management around here.

The LGC “has pro-actively helped local government stay on a good fiscal path — not a perfect fiscal path, but a good fiscal path,” Kara Millonzi, associate professor of public law and government at the University of North Carolina, this week told Business Leaders for Michigan’s Leadership Summit for Fiscal Stability in Lansing. “Not only does it regulate. It assists.”

Easy enough to say, that. Four generations is a long time for North Carolina’s local public officials to learn to live with a system that regulates how much municipalities can borrow and when they can. The LGC establishes fiscal standards for localities; ensures compliance with budgeting standards; sets and audits fund balances; polices compliance with state statutes and debt issuance.

Regulations enacted by the LGC, as the nine-member commission is known, have the force of law. Its members include the state treasurer, secretary of state, state auditor, the secretary of revenue, three gubernatorial appointees and two named by the Legislature.

Its rule-making is independent and its actions do not need approval by the North Carolina General Assembly. Local governments are expected to comply. Under special circumstances, the LGC can even override a local governing body, step in and move to set tax rates. That’s a move the commission has made just five times in three units of government since its founding.

“The influence and oversight of the Local Government Commission is a major reason why North Carolina local government issues have been able to weather this recession at this point,” an associate director of Standard & Poor’s, the ratings agency, told The Pew Charitable Trusts in a 2012 study. “North Carolina’s oversight model is the strongest of any state.”

Now, Michigan’s local governments aren’t so big on “oversight.” It’s considered meddlesome and overreaching. It violates home rule and local control. It smacks of paternalism at least and racism at most, depending on the demographic reality of the locality doing the complaining.

Interesting idea, I thought as I heard Millonzi detail the North Carolina concept. Next thought: it would be less popular than the next iteration of the state’s emergency manager law, probably dead-on-arrival in the Michigan Legislature, in the caucus room of the Detroit Delegation and at Detroit City Council’s table.

That would be a mistake. The simple fact is that more than a few Michigan municipalities and public school districts are caught in a financial vise that will only grow tighter over time. If ever there was a time for uniform rules at the local level governing borrowing, budgeting and financial management, it’s now.

Look, near-record car and truck sales, low interest rates, cheap gas and a 5.1-percent unemployment rate do not negate some harsh economic facts weighing on Michigan and its public sector. Population, personal-income and property-tax growth are not expanding quickly enough to manage swelling legacy costs for pensions and retiree health care.

Nor are they likely to generate the revenue needed to fix crumbling roads and bridges, improve public education and provide basic municipal services. Over time, the erosion in those core government functions presents residents with a basic choice: accept the diminished standard of living or exercise the option to leave.

The time to consider radical changes to how government functions and how its stability (or lack thereof) affects business investment and job creation is now, when economic times are comparatively better than anytime since roughly 2000.

A crisis may be a terrible thing to waste. But so is a warning in good times that should be clear to all but the most willfully self-deluded: move now or pay later.

(313) 222-2106

Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.