Michigan Emergency Managers Underfunded, Ex-Official Says

Michigan lawmakers didn’t set aside enough money to pay lawyers and other advisers needed for emergency managers throughout the state, Andy Dillon, Michigan’s former treasurer, told a judge.

The $5 million set aside in December for emergency managers in Detroit and other cities was inadequate, Dillon told U.S. Bankruptcy Judge Steven Rhodes today during a trial to determine whether Detroit will remain in bankruptcy.

Municipal unions and retired city workers, in a bid to get Detroit thrown out of bankruptcy, have attacked the funding, claiming it was included in the legislation to prevent a public referendum from revoking the law a second time. A law passed by the state legislature can’t be overturned by popular vote if the law funds a government agency.

Dillon finished testifying this morning, the eighth day of a federal trial in Detroit. Critics of the bankruptcy claim PA 436, the emergency manager law, was adopted as part of a plan by state officials to force Detroit into bankruptcy and cut pensions that are otherwise protected by the Michigan Constitution.

Dillon said his office had a difficult time estimating the need for financial advisers, lawyers and other consultants that emergency managers may need.

“Those consultants, you really can’t trust them,” Dillon said, eliciting laughter from a courtroom full of lawyers for the city, unions and retirees.

The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).

To contact the reporter on this story: Steven Church in federal court in Detroit at schurch3@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net

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