In April, the elected officials of financially troubled Benton Harbor, Mich., were essentially stripped of their decision-making power under a state law passed in March. An update of the state’s Emergency Financial Manager Act of 1990, the new law allows the state to review local governments’ fiscal standing sooner and take more actions to prevent bankruptcy. However, critics call it an unconstitutional abuse of power.
Benton Harbor is now under the stewardship of its state-appointed emergency financial manager, Joseph Harris, who had been sent to the city in April 2010 to help officials balance the budget. As of June 2010, the city’s general fund had an annual deficit of $1.4 million, and Commissioner Dennis Knowles says the city government suffered from corruption. In the city’s fiscal year 2011-2012 budget, approved on June 29, Harris wrote that, through “personnel reductions, changes in insurance and numerous other operating adjustments,” he expected the city’s general fund to break even by the end of fiscal year 2011.
Nevertheless, several Michigan residents filed suit in June to repeal the law, saying it is unconstitutional and gives emergency managers too much power. Harris did not return numerous calls seeking comment, but Tom Wieczorek, director of the Washington-based International City/County Management Association’s Center for Public Safety Management and a retired city manager from Michigan, says the new Michigan law is designed as a better alternative to bankruptcy.
There are several triggers that must be tripped before the emergency manager law can be invoked, such as the city itself declares a financial emergency, or it appears to be unable to pay its bills or pension payments, Wieczorek says. Affected cities have the right to appeal the ruling. “[Relieving an elected body is] an extreme step, but, under a bankruptcy provision, pretty much the same thing would happen,” he says. Under the new law, at least state elected officials are still in control, Wieczorek says.
Though Michigan is currently the only state with an emergency manager law, Wieczorek says other states could pass similar laws, just as the idea of placing limitations on public employees’ collective bargaining rights spread from Wisconsin to other states. “It just seems lately to be a trend, what starts in one state moves across [to others],” he says.
They have the power
Under the new law, Michigan’s emergency financial managers have extensive authority. They can reject, modify or terminate any collective bargaining agreement, recommend dissolution of the local government or recommend bankruptcy as a last resort. However, the courts can revoke a manager’s control if the court finds it to be based on insufficient documentation and evidence, or if the decision to assert emergency control is found to be arbitrary and capricious.