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Economy


Michigan to help troubled local governments

Michigan to help troubled local governments

When local governments in Michigan find themselves sliding toward financial ruin, the state will be there to help them a little earlier now, thanks to a new law.
  • Written by American City & County Administrator
  • 22nd March 2011

When local governments in Michigan find themselves sliding toward financial ruin, the state will be there to help them a little earlier now, thanks to a new law. An update of the state’s Emergency Financial Manager Act of 1990 will allow the state to review local governments’ fiscal standing sooner and take more actions to prevent bankruptcy.

Michigan Gov. Rick Snyder signed the six-bill legislation on March 16. The new law aims to ensure that residents are not cut off from basic services and protect taxpayers from having to bailout municipalities that fail to take action, according to Snyder’s office. “The goal is to allow the state to intervene at an earlier stage so that the need for an emergency manager can be avoided altogether,” Snyder said. “If, however, an emergency manager is needed, then they need the tools to properly address these challenges.”

The updated Emergency Financial Manager Act:
• Establishes more extensive criteria for reviewing local governments to indicate fiscal problems earlier and more clearly. There will be 18 triggers that can prompt a preliminary review, up from the current 14;
• Creates a process for reaching a consent agreement that would provide enhanced powers for local administrators to deal more quickly with financial distress;
• Provides a 30-day window, at the beginning of the consent agreement, for collective bargaining to take place to deal with fiscal distress; and
• Grants broad powers to the emergency manager if a local government is in receivership.

A local government is removed from receivership when the financial conditions that brought about the financial emergency are corrected in a sustainable fashion.

Read Snyder’s entire statement.

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