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Press Release from the Citizens Research Council

FOR IMMEDIATE RELEASE
April 21, 2011

Local Government and School District Fiscal Accountability Act

Many Michigan local governments and school districts are facing significant financial stress. Declining revenues, reductions in state aid, and rapidly increasing healthcare and retirement costs are creating huge challenges for local governments and school districts.
Many local governments appear to be on the brink of a financial emergency.

Michigan's law for dealing with local governments facing a financial emergency (Public Act 72 of 1990) was deemed inadequate for the current crisis. To allow for a more robust response to the current fiscal crisis, the state has repealed PA 72 and replaced it with PA 4 of 2011, the Local Government and School District Fiscal Accountability Act. The Citizens Research Council of Michigan has just released an analysis of this Act.

"PA 4 contains a number of tradeoffs. It allows for financial emergencies to be dealt with more rapidly and aggressively, but does so at the expense of local democracy and collective bargaining rights" said CRC Senior Research Associate Bettie Buss.

Under PA 72, the process for state intervention began if one of a number of statutory trigger events occurred. PA 4 retains and expands the triggers, but also allows the State Treasurer to intervene in the absence of a trigger event, at his or her sole discretion.

"Emergency managers will now have all of the authority previously vested in local elected officials," said Bettie Buss. "This authority extends over both financial and non-financial matters. Basically, if an emergency manager is appointed, the authority of local officials is suspended for the duration of the financial emergency."

An emergency manager will have authority over all budgetary matters, will have the power to reject, modify, and terminate contracts and collective bargaining agreements, to take over an inadequately funded pension plan, to recommend consolidation with another government, and to dissolve the government. In the case of local school districts, the emergency manager will also have authority over academic affairs.

"This statute addresses many of the frustrations experienced by emergency financial managers appointed under the previous law and greatly expands the ability of the state to rapidly and forcefully address local government financial crises" said CRC President Jeff Guilfoyle. "However, the tradeoff is that local residents and elected officials will lose their ability to control how a crisis is resolved, and local public employees will lose their ability to collectively bargain for the duration of the crisis, and will have to contend with an emergency manager who can unilaterally terminate contracts."

CRC's analysis of Public Act 4 is available at no cost on the Citizens Research Council's website: www.crcmich.org.

The Citizens Research Council of Michigan is a private, nonprofit public affairs research organization, founded in 1916 to analyze issues pertaining to state and local government organization and finance in Michigan.

Michigan Municipal League advocates on behalf of its member communities in Lansing, Washington D.C., and the courts; provides educational opportunities for elected and appointed municipal officials; and assists municipal leaders in administering services to their communities through League programs and services.

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