CHICAGO — Warning that municipalities across Michigan are facing serious fiscal challenges, freshman Gov. Rick Snyder Monday unveiled a package of bills that would overhaul local governance while slashing state aid by a third.
Snyder’s recommendations would, among other things, allow local units to consolidate and to establish a new “metropolitan authority” to replace existing city and county governments. Mergers and service sharing would be encouraged with a series of new laws, such as one allowing all collective bargaining contracts to be reopened immediately in the case of consolidation.
The plan is modeled after similar moves by Indianapolis and Louisville, which merged with their respective counties into one so-called uni-gov authority, according to Bill Rustem, Snyder’s strategy director. In the case of a merger, all city and county outstanding municipal bonds would be assumed by the new metropolitan government, he said.
“It is clear that we need to look beyond our own immediate township, city, and county boundaries in order to build a stronger Michigan,” Snyder, a Republican, said in a letter to lawmakers, which was released prior to a press conference announcing his proposals.
“Local governments are facing enormous challenges. Unfortunately Michigan is hamstrung by antiquated state laws that are not conducive to cooperation,” Snyder said. “It is time for the state to update these laws so that they reflect the realities of today’s needs.”
The governor’s proposals come less than a week after he signed into a law a controversial set of bills that give the state new powers to intervene with fiscally stressed local governments.
Under the current legislative proposals, local governments would continue to benefit from Michigan’s chief aid revenue program, which is mandated by the state constitution. Officials expect to distribute $659 million to local governmental units in fiscal 2012 under the program.
But Snyder wants to kill a second revenue aid program, which is known as statutory revenue sharing, and distributes roughly $300 million annually to local governments. It primarily helps the state’s major cities, like Detroit.
That program’s funding would be reduced by a third and replaced by what Snyder dubbed the economic vitality incentive program. Under the proposal, cities would be forced to compete for the remaining $200 million in funding by enacting a number of reforms that fall into three categories. Municipalities would earn one-third of their full aid allotment for each category they satisfy.
Local governments, for example, would be required to have employees pay for at least 20% of their health care costs, switch to a defined-contribution pension plan or a hybrid plan, prove they are trying to share service, and produce a “citizen’s guide” to their finances by October 2011.
The change would mean Detroit would lose at least $60 million next year out of the $178 million in state aid it receives under the program, and the city faces additional losses if it fails to meet the governor’s proposed best-practice standards.
“While we have already reduced the city’s accumulated deficit from $330 million to approximately $150 million, we are still facing a fiscal crisis,” Detroit Mayor Dave Bing said in a statement issued after Snyder’s press conference. “Losing 30% of our state revenue sharing at this time would be a serious impediment to our progress. I recognize the need for shared sacrifice, however the state must step up to provide local governments like Detroit the tools we need to make the fundamental changes necessary.”
During his press conference the governor said he had discussed the cuts in state aid with Bing and talked about ways the city could offset them. “The goal here isn’t to punish people,” Snyder said. “It’s to reward success and create a new culture based on best practices.”
The local government reform package is the first of what Snyder said would be a periodic series of special messages to the Legislature on policy issues. His letter to lawmakers Monday morning asked them to make the reform bills a legislative priority. Rustem said he expects bills modeled after Snyder’s proposals to be introduced within the next month.