Editorial: Moving on from emergency managers
For the first time in 18 years, no local government or school district in Michigan is under the direction of a state-appointed emergency manager. While we realize this does not mean that every city or district is free from financial duress (far from it, in fact), it's still a positive reflection on Michigan's ongoing economic recovery.
This week the state Department of Treasury announced that there are no emergency managers overseeing local governments or local school districts. Given the growing discontent with the system and the stripping of local control, it's best for the state to find another way to address financial stress around the state.
While Gov. Rick Snyder received a lot of blame for the emergency manager system — especially following the Flint water crisis, which developed in 2014 while they city was under emergency management — he inherited in 2011 four emergency management cases that had been authorized by former Gov. Jennifer Granholm.
Under Snyder, seven more financial oversight cases were authorized, including high-profile cases in the cities of Flint and Detroit.
This year, Highland Park School District was the last to be released from state management. In a press release, State Treasurer Nick Khouri cited the hard work of communities to achieve fiscal stability as the primary reason for reaching this point. There are four school districts that are still transitioning back into fully local control, but they a less-invasive partnership with the state.
Since 2000, at least one emergency manager appointed by the state has overseen local finances. The state has the legal ability to intervene when local governments undergo financial emergencies, but there is a long and complicated process for the governor to appoint a manager for a community or school district. It's gotten harder under the latest iteration of the state's emergency manager law.
The governor's office must now work with local and state officials to determine whether a credible financial emergency exists. If state intervention is deemed necessary, the local government unit has four options: a consent agreement, emergency manager oversight, evaluation by a neutral third party, or file a Chapter 9 bankruptcy. If financial oversight is chosen, a manager is appointed until the financial problems are resolved or unless the local government votes the manager out. But it's very unlikely any local government would choose emergency management.
“Each case is unique,” says Ron Leix, Treasury spokesman. “The goal is always for the state and local government to work together to come to a common ground solution to solve the financial emergency.”
But he says it’s good when governing bodies are proactive about financial issues so there isn’t a need for state intervention.
“The governor has said he never wants to appoint an emergency manager. He doesn’t relish that,” says Ari Adler, director of communications for Snyder. “We look for the red flags. Sometimes a review board can stop the need for emergency managers. The governor only takes that step when everything else has fallen.”
According to Adler, part of this decrease in the need for emergency managers is due to balanced state budgets being completed early. In the past, communities and school boards have had to guess what their state funding will be. But, as is the case this year, when the budget is completed by June, schools have plenty of time before the fall to determine their own budgets.
The state is also working to alleviate the strains of unfunded pension liabilities for both schools and municipalities.
Just because things are looking better doesn’t mean that financial disaster is fully avoidable. Local officials need to be ever-vigilant in properly handling taxes and other fiscal matters.