CHICAGO – Michigan officials on Wednesday took steps to ensure that emergency financial managers remain in place at three school districts and four cities after the election board formally approved putting a measure asking voters to repeal the management law on the November ballot.

The Michigan Board of State Canvassers voted Wednesday to place the Public Act 4 referendum --which outlines state authority over troubled municipalities -- on the Nov. 6 ballot, election officials confirmed. The move followed a Michigan Supreme Court ruling on Friday that a referendum to overturn the current law must be allowed on the ballot.

The election board's formal action certifying petitions triggered a suspension of the existing law. Michigan Attorney General Bill Schuette has said the suspension automatically revives the previous law authorizing state oversight of troubled municipalities known as Public Act 72. The newer law increased the powers held by state-appointed emergency managers over troubled governments. The court's ruling came after months of debate over the status of the petitions seeking to put the repeal to a vote.

Michigan Treasurer Andy Dillon wants lawmakers to pass a new emergency management law, but in the interim the Local Emergency Financial Assistance Loan Board met Wednesday to make manager appointments to the four cities.  Gov. Rick Snyder made appointments for the three districts.

The Local Emergency Financial Assistance Loan Board appointed EFMs Joyce Parker in Ecorse, Joe Harris in Benton Harbor, Louis Schimmel in Pontiac and Ed Kurtz in Flint. Parker, Harris and Schimmel all were reappointed to the positions and Kurtz will replace Mike Brown in Flint, who was ineligible to serve under the previous law because he previously had served as interim mayor.

"The action taken today was necessary to ensure continuity in these communities experiencing financial emergencies," Deputy state Treasurer Roger Fraser said in a statement.  "The three EFMs who were re-appointed have been making positive changes to return their respective cities to prosperity. Mr. Kurtz has proved his ability to assist struggling cities in the past and will be a steadying hand through this period of transition in Flint."

Snyder appointed Roy Roberts in Detroit Public Schools, Donald Weatherspoon in Muskegon Heights Schools and Joyce Parker in Highland Park Schools as EFMs to continue oversight for the struggling school districts.

The Local Emergency Financial Assistance Loan Board includes Treasurer Andy Dillon, state Budget Director John Nixon, and Licensing and Regulatory Affairs Director Steven Hilfinger.

While state officials contend the former law remains in place, the group Stand Up for Democracy behind the petition drive to get the repeal question put to a vote disagrees and is expected to file a lawsuit.

Dillon has urged lawmakers to take up an existing bill that would create a new emergency management law. If approved, the new law, Public Act 76, would have the effect of nullifying not only the suspension but a successful repeal of the current law in November. Snyder supports passage of new or amended legislation.

Fitch Ratings warned in recent report that repeal of the controversial emergency management law would likely further challenge already fiscally troubled municipalities.

"Fitch believes the possible suspension and repeal of Michigan's emergency manager law presents uncertainties for the municipalities that have had managers appointed to administer them," analyst Amy Laskey wrote in a comment. "Entities that do not have appointed managers but are in or near fiscal distress may be at risk of not getting the assistance they need."

Detroit has a consent decree that gives state officials greater oversight over the city but stops short of emergency management. However, Fitch warned that the consent decree could also be negatively impacted by the suspension or repeal of the current law.

"As Detroit's fiscal stability agreement has several features that rely on the existence of PA 4, most notably the ability to suspend collective bargaining, the repeal of PA 4 could weaken or nullify the agreement," Laskey said. "This may have an adverse effect on the city's ability to continue the reforms already begun under the agreement and therefore stabilize and improve its credit quality."

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.