Prop 1 is fight over local control, with backdrop of fiscal crisis

Of the many laws Republican Gov. Rick Snyder has championed during his first 21 months in office, few have proved as divisive as the one that gave emergency managers sweeping new "superpowers" allowing them to dismiss elected leaders and rip up union contracts to help balance budgets in financially distressed cities and school districts.

If voters vote "yes" to Proposal 1 to keep the law in place, emergency managers in Pontiac, Flint, Ecorse and Benton Harbor and in the Detroit, Highland Park and Muskegon Heights school districts who have had most of their powers suspended until the Nov. 6 election will be back in charge, while other cities in financial distress such as Allen Park may move closer to getting their own emergency managers.

If voters vote "no" and repeal Public Act 4, emergency managers could remain in place with much weaker powers under the 1990 emergency manager law -- or lawmakers could try to draft a new law mimicking Public Act 4. Some distressed cities or school districts could file for Chapter 9 bankruptcy, potentially leaving bondholders unpaid, unionized workers without contracts and retirees without the pensions they were promised. (Michigan is one of 26 states that permit their municipalities to file for bankruptcy under federal law, says the nonpartisan Citizens Research Council of Michigan.)

Snyder and other supporters of Public Act 4 say it was used in very few cases during the nearly 17 months it was in effect. They note it has been a powerful tool to help financially troubled local governments and school districts avoid bankruptcy, which they say would have many of the same results -- including dismissal of elected leaders and shredded union contracts -- while taking longer and potentially damaging the credit rating of state and local governments in Michigan. They argue that locally elected officials may be reluctant to make the difficult decisions needed to restore solvency without the threat that an emergency manager will be appointed by the state.

A CRC analysis of the law called it "the most intrusive version of Michigan laws that allows state appointment of a manager who has extraordinary powers over a local unit of government that is found to have a financial emergency."

"We're seeing progress in a lot of communities and it is important to emphasize we're talking about a small number of communities. Seven out of 2,500 jurisdictions in our state," Snyder recently told reporters. "It’s a good law."

Opponents say Public Act 4 disenfranchises voters by pushing aside officials elected by residents to city councils and local school boards and selling assets without public approval. They note that state officials overseeing the emergency manager process -- including Snyder and Treasurer Andy Dillon -- are white, while the four cities and three school districts overseen by emergency managers have populations that are largely black (although some emergency managers also are black).

They say it forces unionized teachers, police officers and city workers to bear the brunt of restoring a school district or city’s financial health by imposing pay cuts, reducing benefits and changing work rules, rather than making bond holders owed money by the struggling entities to share in the pain.

Repeal supporters sometimes have been strident in their opposition to the law. When the Board of State Canvassers tied 2-2 along party lines in April, failing to put the measure on the ballot, about 100 audience members began pointing fingers and shouting "Shame!" at the board. There have been protest rallies and contentious public hearings where review teams meet to discuss if an emergency manager is needed. For some opponents, repealing the law has become an important voting rights and civil rights issue.

"It’s about local control and shared sacrifice, and the only people who aren’t sharing in the sacrifice are those in the municipal bond market," said Greg Bowens, spokesman for Stand Up For Democracy, the pro-repeal ballot committee. "The emergency manager act … is an impediment to coming up with real ways to let cities and school boards fight off the sharks on Wall Street."

Since its formation in 2011, Stand Up For Democracy has raised about $183,000 -- almost all of it from Michigan Council 25 of the American Federation of State, County and Municipal Employees. Those figures run only through July. Ballot prop committees will report their finances again at the end of October.

A mixed review by public administrators

Among local officials, reaction to the law is mixed, according to a survey released last month by the Center for Local, State and Urban Policy at the University of Michigan’s Gerald R. Ford School of Public Policy. The study found that 38 percent of local government leaders support the new law, while 30 percent oppose it, 21 percent are neutral and 11 percent say they’re unsure. Less than half -- 43 percent -- think it will be effective at protecting or restoring the fiscal health of local governments, while 19 percent think it will be ineffective, 14 percent think it won’t make much of a difference and 24 percent say they’re unsure how effective or ineffective the law will be.

Prop 1 got on the ballot after 225,885 petition signatures were turned in last February by Stand up for Democracy -- and after petitions survived a lengthy court challenge over whether the size of its type met legal standards.

More hurdles for EM law

The tougher emergency manager law has been one of Snyder’s signature accomplishments of his first term. But the battle over it extends past the actual Prop 1 vote.

The Sugar Law Center filed a September lawsuit in Ingham County Circuit Court arguing that the state can’t revert to the 1990 emergency manager law because it was repealed when lawmakers passed Public Act 4 last year. If no valid emergency manager law exists, cuts that emergency managers have made to services or union contracts would be on hold until voters have their say in November, and could be thrown out entirely if voters repeal the law. Such a ruling also could put a consent agreement negotiated with Detroit Mayor Dave Bing and the Detroit City Council on hold, although the consent agreement includes language saying it stands even if Public Act 4 is repealed. The cities of River Rouge and Inkster also are operating under consent agreements.

And even if Prop 1 passes and PA 4 is upheld, a key provision still could be eliminated.

CRC notes that if Prop 1 passes and Prop 2, a constitutional amendment to place collective bargaining rights in the constitution passes, too, "... provisions in PA 4 that allow an emergency manager to abrogate collective bargaining contracts would be voided."

Kathy Barks Hoffman covered Michigan government and politics for more than two decades as a reporter for the Detroit News, the Lansing State Journal and the Associated Press, where she headed AP’s Lansing Bureau for nearly 17 years. She now works in Lansing for the Public Affairs Practice of public relations firm Lambert, Edwards & Associates.

At a glance: Proposal 1

WHAT VOTERS WILL DECIDE: If you vote for Proposal 1, it is effectively a vote for the emergency manager law approved in 2011, which gives broader powers to address fiscal crises. If you vote against Proposal 1, effectively you are supporting a reduction, at least in the short term, in the powers of state government to intervene in troubled local governments.

WHAT THE ADS SAY: Advocates of repeal of the EM law (gained through a "no" vote on Prop 1) have used ads to argue the law gives dicatorial power to the state and is bad for public safety. Those wishing to keep the EM law have not formed an organized advertising effort.

WHAT THE TRUTH SQUAD SAYS: The Michigan Truth Squad has not weighed in on the sparse campaign literature on Proposal 1.

ON THE BALLOT: PROPOSAL 12-1

A REFERENDUM ON PUBLIC ACT 4 OF 2011 – THE EMERGENCY MANAGER LAW

Public Act 4 of 2011 would:

Establish criteria to assess the financial condition of local government units, including school districts.

Authorize Governor to appoint an emergency manager (EM) upon state finding of a financial emergency, and allow the EM to act in place of local government officials.

Require EM to develop financial and operating plans, which may include modification or termination of contracts, reorganization of government, and determination of expenditures, services, and use of assets until the emergency is resolved.

Alternatively, authorize state-appointed review team to enter into a local government approved consent decree.

Should this law be approved?

YES ___

NO ___