CHICAGO — Michigan would abolish its 10 bond-issuing authorities and consolidate them into the newly created Michigan Finance Authority under an executive order issued by Gov. Jennifer Granholm last week.
The order will take place May 30 unless the Legislature steps in to block it.
The move is driven by an effort to save money for the state, which, like most states across the U.S., has suffered from budget shortfalls amid falling revenue. Granholm announced the new finance authority last week as one of 29 government cuts she has crafted to “transform” Michigan government.
“By consolidating several public finance authorities into one, we will be more nimble and improve coordination and efficiency,” the Democratic governor said in a release announcing the move.
The new finance authority would act as an independent unit of the Michigan Department of Treasury.
It’s unclear how much money the state would save by eliminating the 10 bond-issuing authorities, whose board members are unpaid.
Most share the same staff from the Treasury Department, and that staff is expected to remain in place.
Granholm’s representatives did not return phone calls seeking comment.
The consolidation would not affect outstanding debt, which would remain an obligation of the authority that issued the debt and not the state.
The move also is not expected to affect the state’s debt issuance, according one market participant.
“You have to keep in mind where the state of Michigan is — any type of cost savings you have to look at,” said Jack Brusewitz, a senior managing director at independent broker-dealer Leonard Capital Markets who serves on the board of the Michigan Municipal Bond Authority, one of the more active issuers in the state.
“It should save the taxpayers some money and shouldn’t affect whatsoever how these transactions get down or the pricing,” Brusewitz said. “Nothing should change at all from an administrative or operational standpoint. I don’t think they’ll miss a beat.”
The state treasurer — who is a chair or member of all current bond authorities — would chair the new seven-member board.
The remaining six members would be appointed by the governor, and will be experts in one of several areas, including public finance.
According to the executive order, one member will have experience in housing and community development issues or relating to public finance.
Another will have experience in economic development or public finance; one will have experience in natural resources or environmental issues or public finance; and one will have experience in hospitals or public finance. A sixth member’s experience remains open.
The members will serve for four years, and not more than three members can come from the same political party, the order decrees.
The move would also transfer to the new authority the power of the Michigan Strategic Fund to finance public and private schools and the power of the State Land Bank Fast Track Authority to issue bonds and notes.
The entities that would have their bond-issuing authority abolished are: Michigan Forest Finance Authority, the Michigan Higher Education Facilities Authority, the Michigan Higher Education Assistance Authority, the Michigan Higher Education Student Loan Authority, the Michigan Municipal Bond Authority, the Michigan Public Educational Facilities Authority, the Michigan Tobacco Settlement Finance Authority, the Michigan Underground Storage Tank Financial Assurance Authority, the State Higher Education Facilities Commission, and the State Hospital Finance Authority.