Dec. 14 (Bloomberg) -- Michigan’s Senate approved a law to give financially distressed cities and school districts a choice of bankruptcy or a state-appointed emergency manager with power to cancel union contracts.
The bill, which goes to Republican Governor Rick Snyder for his signature, would replace a similar 2011 measure voters repealed Nov. 6. Opponents who led that effort called the law, Public Act 4, undemocratic and an attempt to bust unions.
The new measure will retain the state’s power to declare financial emergencies, while giving local governments the options of a consent agreement similar to Detroit’s, entering mediation with creditors, getting an emergency manager or filing for Chapter 9 bankruptcy protection.
“What we’re doing is providing alternatives,” Republican Senator Phil Pavlov of St. Clair said yesterday before the vote.
The measure will take effect 90 days after the legislature adjourns in Lansing, the capital, as it is expected to this month. That means the law can’t solve Detroit’s financial crisis, which threatens payless paydays, dismissals and bankruptcy.
Detroit avoided state takeover in April with an agreement to rein in spending. State Treasurer Andy Dillon said this week he would begin a new audit of the city, which he said isn’t moving fast enough to curb a deficit projected to hit $400 million by June. The review may lead to an emergency manager under a 1990 law that grants less power than the now-defunct 2011 version.
The repeal of Public Act 4 left the state without clout to rescue cities and schools, according to Snyder, who championed the law.
“Just because the emergency manager law was defeated doesn’t mean the problem went away,” Republican Senator John Pappageorge of Troy said today.
While the new bill would reinstate broad powers for emergency managers, local officials could stop certain of their decisions or develop alternate solutions that produce equal savings.
It also permits local officials to ask the governor to remove emergency managers within the first year, or dismiss them after a year with a two-thirds vote of a governing body such as a city council.
Democratic Senator Bert Johnson of Highland Park said the measure thwarts the will of people who voted to repeal Public Act 4.
“We do not need a dictator from Lansing,” he said.
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