All About Emergency Managers: An analysis of HB-4214

Talk of HB-4214 has been making the rounds for a couple of days. Articles by E. D. Kain and James Parks, and on-air mention by Rachel Maddow have helped to spread the word about this otherwise little-known piece of legislation. It's very easy to take pundits and columnists at face value, but responsible citizenship requires us to look in closer detail at the legislation in question. I have done so below, and hope you will do the same and draw your own conclusions. You can find the legislation below:

http://www.legislature.mi.gov/%28S%280dt31045210gkc4523a5eanw%29%29/mileg.aspx?page=BillStatus&objectname=2011-HB-4214

[As my source I am using the pdf file "As Passed By The Senate", rather than the summaries or analyses.]

First let's ask if the assertions are true: does the legislation indeed allow for the appointment of "emergency managers" to take control over democratically-elected offices?

In a word, yes. HB-4214 is sponsored by Michigan's 79th district representative Al Pscholka (R), whose other legislative projects indicate a preoccupation with labor and education reform of a pretty radical variety. This particular bill provides the legal means by which the state executive can "take action and to assist" local governments (those of cities, townships, school districts, etc.) if it is determined that those governments are in a condition of "financial stress or financial emergency". Assistance is provided through the assignment of "emergency managers" who are given certain powers over governmental functions. The next question is, what is the extent of the emergency managers' powers?

We will return to this question after establishing some background. Parks, Kain and Maddow state that Gov. Snyder has the more or less autocratic authority to "declare" a city, village or other local government to be in a financial emergency, and to assign an emergency manager. But this is only partly true. The legislation clearly lays out the process of determining the existence of a "local government financial problem". This process is carried out in un-democratic ways, but it is not strictly dictatorial.

The determination is made by a "the state financial authority of a local government", detailed in §12. Subdivisions (a) thru (r) describe specific situations, at least one of which must be present (as determined by the state financial authority), in order for a preliminary review team to be established. This preliminary review team is appointed by the governor, and will consist

"of the state treasurer or his or her designee, the director of the department of technology, management, and budget or his or her designee, a nominee of the senate majority leader, and a nominee of the speaker of the house of representatives. The governor may appoint other state officials or other persons with relevant professional experience to serve on a review team to undertake a municipal financial management review." §12(3)

The situation is somewhat different in the case of school districts, including at least

"the state treasurer or his or her designee, the superintendent of public instruction or his or her designee, the director of the department of technology, management, and budget or his or her designee, a nominee of the senate majority leader, and a nominee of the speaker of the house of representatives." §12(4)

This review team is given "full power" to "examine records and books" (§13(1)a), "utilize the services of other state agencies and employees" (§13(1)b), and negotiate what is called a "consent agreement" with the chief administrative officer of the local government in question (mayor, commissioner, etc.). This agreement must be approved by the "governing body of the local government".

In political rhetoric, this is the opportunity for the people to voice their opinions. But because of our representative (indirect) democracy, we can only formally voice our opinions through our representatives. Therefore, if this legislation is used against our community, we must try to influence city council members by voicing our opinions. Council meeting times and locations are available on city council websites.

§15 provides the governor with the authority to determine whether or not the local government is in a condition of severe financial distress, and therefore what action to take. The local government has 7 days to request a hearing on the governor's ruling. Even after a hearing, the governor, "in his or her sole discretion based upon the record, shall either confirm or revoke, in writing, the determination of the existence of a financial emergency."

In other words, after the governor's decision (on the existence of a financial emergency) is made, a hearing on the governor's decision may be requested. But even after the hearing, the governor has sole veto power. More democratic legislation would require this final decision to be made by an outside entity, or at least by committee.

§15(3) This decision may be appealed by a vote of 2/3 majority of the governing body of the local government, to the Ingham County circuit court. If the governor's decision is found to be unsupported by evidence, or to have been "arbitrary, capricious, or clearly an abuse or unwarranted exercise of discretion" (basically an abuse of power), the court may overturn the governor's decision.

§15(4) If a financial emergency is found to exist, "the governor shall declare the local government in receivership [my emphasis] and shall appoint an emergency manager to act for and in the place and stead of the governing body and the office of chief administrative officer of the local government." The bill mentions the emergency manager's "broad powers ... to rectify the financial emergency..." Elected democratic officials have no powers "except as may be specifically authorized in writing by the emergency manager and are subject to any conditions required by the emergency manager."

Parks asserts that "the bill even allows Snyder to appoint a corporation as the emergency manager." This is untrue: §15(5)c of the bill clearly stipulates that the emergency manager must be an individual. However, this does not preclude possible associations with (and thus, influence from) large corporations, even those outside of the local government's reach (§15(5)b). The only requirement is that emergency manager candidates must have "a minimum of 5 years' experience and demonstrable expertise in business, financial or local or state budgetary matters." (§15(5)a)

§15(8) Short of impeachment, only the governor can remove the emergency manager, either if he/she is not doing satisfactory work, or if the "financial emergency is rectified", which is determined by the state treasurer [§15(9)].

Emergency managers do not have absolute power. For instance, if the emergency manager wants to "sell or transfer a public utility" in a city or village, "approval of a majority of the electors" is needed. §17(2) says the emergency manager does have the authority to suspend elected officials' "access to the local government's office facilities, electronic mail, and internal information systems". But §19a indicates that "the salary, wages, or other compensation, including the accrual of postemployment benefits, and other benefits of the chief administrative officer and members of the governing body of the local government shall be eliminated." This is indeed looking more and more like a power grab.

§19(1) spells out all the various civil powers of the emergency manager. While all are worth reading, (c) is one of the most alarming: the emergency manager will "receive and disburse on behalf of the local government all federal, state, and local funds [my emphasis] earmarked for the local government. These funds may include, but are not limited to, funds for specific programs and the retirement of debt." So basically the emergency manager has absolute control of our tax money.

This bill provides the legal means for Gov. Snyder to decide that, say, the CEO of Chrysler, being an "expert" in business and financial budgetary matters, would be an appropriate emergency manager for the city of Detroit. The CEO of Chrysler would have control over all federal, state and local funds headed to the city of Detroit. We'd be fools to believe that his use of our funds would be unbiased to his position in Chrysler. All he would have to do is convince Gov. Snyder and the state treasury that his financial decisions would save Detroit from financial oblivion.

Collective bargaining is mentioned in several places. §20b explicitly addresses collective bargaining, but does so to protect "payment of a benefit upon the death of a police officer or firefighter that occurs in the line of duty". However, in §19(1)k, the emergency manager may "reject, modify or terminate 1 or more terms and conditions of an existing collective bargaining agreement." This decision is legitimate if the emergency manager and the state treasurer decide that it is "reasonable and necessary", given local and broader economic climates, and given that it is "temporary and does not target specific classes of employees".

Lastly, to nail the point home: §25 grants immunity of liability to emergency managers, "as provided in section 7(5) of 1964 PA 170, MCL 691.1407."

As Michigan residents, we should be embarrassed at the lack of faith our house, senate and governor have in our ability to solve our own problems. Rather than working to support labor, education and health care, which obviously encourage community and free thought, steps are serious steps are being taken to make them dependent on private institutions for funding. The local governmental system has the capacity to represent the people. Michigan's cities and schools already have a bothersome reliance on corporate funding, it does not also need state-appointed babysitters. HB-4214 would pave the way toward a regression to feudalism. While we would be short-sighted to cry "fascism", we would be far more so to accept Gov. Snyder's signature on this cynical piece of legislation.

(As a side note: Sections 2, 4, and 6-11 are curiously absent from the documents available at the link above. Whether this is an oversight or a deliberate omission is uncertain.)

UPDATE (3/14/11): According to a personal email from Rep. Pscholka, sections 2, 4, and 6-11 do not exist:

"The sections that you are referring to do not exist. The bill is formatted by specific standards developed by the non-partisan Legislative Service Bureau (LSB). LSB does all of the bill drafting for all members of the House and Senate in the State of Michigan ... All other Michigan legislation is formatted similarly."