Snyder, Schauer differ on Rx for ailing cities, schools

Chad Livengood
Detroit News Lansing Bureau

With an end in sight in Detroit's historic bankruptcy, Gov. Rick Snyder is turning his focus to the city's deficit-ridden school district that has been mired in emergency management for five years.

But as the Nov. 4 election nears, the Republican governor also is touting his success tackling financial problems in troubled cities and school districts with an emergency manager law that replaced an earlier version voters repealed in 2012.

He notes his emergency managers have left Pontiac, Benton Harbor and Allen Park after downsizing city operations.

"We've been effective in other places going in, getting the job done and getting out," Snyder said Thursday after a campaign town hall event in Troy.

But Democratic challenger Mark Schauer is rallying unions and trying to gain votes from those under state oversight by vowing to abolish the current emergency manager law and send in "financial transition teams" to help communities and school districts.

"This governor's plan for our cities is cutting revenue sharing payments, pushing cities into a financial crisis and then assigning emergency managers," Schauer said in an interview.

The teams would help cities and schools forecast revenue and task "financial experts" to monitor budgets and ensure local governments "stay within those limits," he said.

Snyder has gradually increased municipal revenue sharing in the past three fiscal years after slashing payments to the cities and counties in 2011.

Tim Wittebort, a Royal Oak corporate finance attorney, served on a financial review team that recommended former Gov. Jennifer Granholm send Pontiac an emergency manager.

He said there was no real change to Pontiac's finances until Snyder took office and pushed for granting emergency managers more authority to cut costs and outsource services, such as contracting policing with the Oakland County Sheriff's Office.

"Prior to that, it was a law without any teeth," he said.

Power struggles

Wittebort said prior emergency managers in Pontiac and Detroit Public Schools were hamstrung by lawsuits in power struggles with elected governing boards.

"The only way to take the politics out of it is to appoint an independent voice," he said.

The governor's attention is turning to the cash-strapped DPS and its $127 million operating deficit that could take several years to wipe out — despite prolonged state intervention that began under Snyder's predecessor, Granholm.

"We've had an emergency manager longer than I'd like in that situation," Snyder said in a recent interview with The Detroit News.

He said his administration is studying other options than continued emergency management.

He did not rule out dissolving the district to shed its debt as his administration did in Highland Park and Muskegon Heights, where the entire school districts were converted into charter schools.

"There's multiple alternatives out there," Snyder said.

In an interview, Snyder also suggested there needs to be better coordination of public education in Detroit among the mishmash of choices — DPS, charter public schools and the 15 former DPS schools run by the governor's Education Achievement Authority.

Asked whether he would consider turning over control of all public schools to Mayor Mike Duggan, Snyder replied: "I'm not going to start that speculation … but I would want the community to be involved in the dialogue."

But Duggan said Saturday while campaigning with Schauer at Eastern Market: "I'm not under any circumstance going to run Detroit Public Schools. It's been a complete failure, no doubt about it.

"I'm going to address education at some point in the future, but it won't be with me running the schools. I think the issue has to do with central authorization."

Late last month, Detroit Emergency Manager Kevyn Orr transferred his remaining control over City Hall to Duggan but maintained management of the city's bankruptcy, which remains on trial in federal court.

EMs are blamed

LaMar Lemmons III, president of the powerless Detroit Board of Education, said the district's continued budget woes are a result of Emergency Manager Jack Martin and his predecessors "putting 40 kids in a class," closing schools and handing over 15 schools to the EAA.

"It is the last three governors' mess," said Lemmons, referencing state intervention in DPS under Snyder, Granholm and John Engler.

Erasing the DPS debt has proved to be harder than the city of Detroit's bankruptcy restructuring because the school district has fewer resources and valuable assets, said Jim McTevia, a Bingham Farms-based financial consultant.

"They have a real anchor around their neck as far as the debt is concerned and that's not going to go anywhere at all," McTevia said of DPS.

Snyder, a former Gateway Computer executive, has fashioned himself as the fix-it man for government, with a special emphasis on balancing the books of Michigan's largest city.

Starting in 2011, Snyder got the Legislature to beef up the powers of state emergency managers sent into financially troubled school districts and cities to balance budgets and make controversial decisions that elected officials sometimes won't make.

Granting emergency managers the power to cancel union contracts stirred a union-funded referendum that resulted in a November 2012 repeal of the law.

The repeal of Public Act 4 came as Snyder's deal with Detroit officials to straighten out the city's books was failing to yield results. In December 2012, the Legislature sent Snyder a new emergency manager law with more options for cities and school districts in state receivership.

Snyder appointed Orr emergency manager of Detroit in March 2013, and the Washington, D.C., attorney took the city into bankruptcy four months later.

Schauer has said he likely would have authorized a bankruptcy for Detroit. But the former congressman from Battle Creek has criticized Snyder for not preventing Orr from reducing pensions for city workers, despite language in the state constitution saying earned pension benefits cannot be "diminished or impaired."

Orr's debt-cutting plan calls for general retirees to get a minimum 4.5 percent reduction in their pensions, while retired police officers and firefighters will see their annual cost-of-living allowances reduced. The city also plans to end generous retiree health insurance in an effort to shed more than $4 billion in unfunded liabilities.

"This governor threw city of Detroit pensioners under the bus by violating the state constitution," Schauer told The News.

Staff Writer Lauren Abdel-Razzaq contributed.