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Michigan Gov. Snyder: Overturn of EM Law Could Mean Muni Bankruptcies

CHICAGO – Michigan Gov. Rick Snyder Wednesday warned that the repeal of the state’s controversial emergency management law could lead to municipal bankruptcies for some of the state’s most troubled jurisdictions.

“Bankruptcies could have a greater likelihood of happening,” Snyder said during a post-election press conference in Lansing Wednesday morning after voters defeated a measure that would have upheld the law.

“We could have a situation of not having a manager who can do their work more effectively and faster, and the probability of municipal bankruptcy could increase because that could be the only option left to them,” he said. “I still think there are a lot of negative consequences of municipal bankruptcy, if you look at places like California.”

No local government has ever declared bankruptcy in Michigan, which has a high number of struggling cities and school districts.
Enacted in 2011, Public Act 4 significantly broadened the state’s authority to intervene in troubled communities as well as the powers of emergency managers, giving them the ability to terminate or unilaterally amend labor contracts. There are currently eight governments in state-controlled emergency management status.

PA 4 has been suspended since late August, when the state election board approved the repeal question for the ballot. Michigan is currently operating under its previous, less powerful, law for fiscally stressed governments, Public Act 72.

PA 72, meanwhile, faces its own challenge from opponents who filed a lawsuit last month arguing that the revival of the previous law is illegal. A hearing on the case is set for after Thanksgiving. Snyder said a court-mandated overturn of PA 72 would pose a big problem for the state.

“Then there would be no emergency manager law, and that would be a concern,” he said. “That would really cause me to say that we need to be having a legislative discussion because we need some tools.”

There are currently eight local governments under state-controlled emergency management status in Michigan. Detroit operates under a separate consent agreement that has some ties to PA 4 but does not rely on it. Snyder said he believes the consent agreement remains legal despite the overturn of PA 4.

The emergency manager of Detroit Public Schools, Roy Roberts, warned last week that he would leave the position if the law were overturned. Under PA 4, Roberts controlled DPS’ fiscal and academic polices, but he controls only the fiscal side of the district under current law.

Roberts said in a statement Wednesday he would stay in the position for at least a month before announcing a decision.

Snyder said he plans to meet soon with top legislative leaders to discuss the possibility of new legislation that would replace some of the powers of Public Act 4. Among the less controversial but still-effective provisions of PA 4 is an early-warning system for when local governments are facing fiscal stress, the governor said.

Snyder said there are already some bills “in the pipeline.” Senate Majority Leader Randy Richardville (R-Monroe) has suggested he might sponsor a bill.

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