Dec. 6 (Bloomberg) -- Financially distressed Michigan cities and school districts could choose between mediation with creditors, bankruptcy or a state-appointed emergency manager under legislation Governor Rick Snyder and Republican lawmakers said they’ll introduce today.
The proposal would replace a 2011 law repealed by voters Nov. 6, according to a treasury department statement. That law gave emergency managers sweeping powers to fire elected officials, sell community assets and cancel union contracts to balance budgets. Five cities and three school districts now operate with emergency managers under a weaker 1990 law, which would be replaced by the new measure.
The repeal of Public Act 4 left the state without enough clout to rescue cities and schools from insolvency, Snyder has said. The governor had championed the 2011 law, which opponents called undemocratic and an affront to local voters.
“Governor Snyder feels strongly that he has a responsibility to the citizens of those communities and school districts, and the state as a whole, to protect the health, safety and welfare of residents and ensure children receive a first-class education,” according to the statement.
The proposal comes as Republicans who run the Legislature consider a right-to-work law banning mandatory dues collections from workers covered by union contracts.
Several hundred union supporters crammed into the state Capitol yesterday to protest against the bill with loud chants audible in the Senate chamber.
The new financial rescue proposal would retain the state’s power to declare financial emergencies in cities and school districts, while giving local governments the options to reach a consent agreement with the state -- similar to one Detroit has - - mediation, an emergency manager or a Chapter 9 bankruptcy filing.
Under current law, the state must approve a bankruptcy request. The proposed new law would tie a Chapter 9 filing to a full state review of city or school district finances.
While the new bill would reinstate broad powers for emergency managers, local officials would have authority to approve certain decisions made by the managers, or develop alternate solutions that produce equal savings.
The proposal would also permit local officials to ask the governor to remove emergency managers after a year, or dismiss them with a two-thirds vote of the governing body, such as a city council.
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