Financial emergency in Michigan#Emergency manager

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Period = from:1988 till:2010

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bar:1 color:red from:1988 till:end text:Public Act 101 of 1988

bar:2 color:tan2 from:1988 till:1990 text:Hamtramck

bar:2 color:tan2 from:2000 till:2007 text:Hamtramck

bar:3 color:yellow from:2000 till:2009 text:Highland Park

bar:4 color:skyblue from:2002 till:2004 text:Flint

bar:5 color:green from:2008 till:2009 text: Three Oaks

bar:6 color:blue from:2009 till:end text: Detroit Public Schools

bar:7 color:red from:2009 till:end text: Ecorse

ScaleMajor = gridcolor:line unit:year increment:1 start:1988

In 1986 a state court appointed a receiver, Louis Schimmel, for the city of Ecorse which had a $6 million deficit. The court appointed receivership lasted until 1990.{{cite news|last1=Alley|first1=Jason|title=ECORSE: Former receiver not surprised by city's state of affairs|url=http://www.thenewsherald.com/articles/2009/05/23/news/doc4a18350567745495487073.txt?viewmode=fullstory|accessdate=February 9, 2016|work=The News Herald|publisher=Digital First Media|date=May 23, 2009}}{{Dead link|date=December 2024 |bot=InternetArchiveBot |fix-attempted=yes }}

The financial emergency status, along with the Emergency Financial Manager (EFM) position, was first created in Public Act 101 of 1988 for the specific emergency in Hamtramck. Public Act 101 was amended by Public Act 72 of 1990, allowing an Emergency Financial Manager to be appointed for any local governmental unit. PA 72 in turn was replaced by Public Act 4 of 2011, which renamed the position to Emergency Manager (EM) and gave the Manager additional authority.

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bar:1 color:red from:2010 till:2012 text:Public Act 4 of 2011

bar:1 color:yellow from:2012 till:end text:Public Act 436 of 2012

bar:2 color:tan2 from:2013 till:2014 text:Hamtramck

bar:3 color:blue from:2010 till:2016 text: Detroit Public Schools

bar:4 color:red from:2010 till:2013 text: Ecorse

bar:5 color:tan2 from:2010 till:2014 text: Benton Harbor

bar:6 color:yellow from:2010 till:2013 text: Pontiac

bar:7 color:skyblue from:2011 till:2015 text: Flint

bar:8 color:green from:2012 till:2018 text: Highland Park Schools

bar:9 color:red from:2012 till:2016 text: Muskegon Heights School District

bar:10 color:tan2 from:2012 till: 2014 text: Allen Park

bar:11 color:blue from:2013 till: 2014 text: Benton Harbor

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When the Referendum petitions were approved by the Michigan State Board of Canvassers on August 8, 2012, under orders from the Michigan Supreme Court, PA 4 was suspended and the previous version, PA 72, was reinstated.{{cite news|last=Anders|first=Melissa|title=Emergency manager law officially suspended as referendum is certified for the November ballot |url= http://www.mlive.com/politics/index.ssf/2012/08/emergency_manager_law_official.html |accessdate=30 January 2013|newspaper=MLive.com|date=August 8, 2012}} All current EM except for Michael Brown in Flint were reappointed as EFM by the Local Emergency Financial Assistance Loan Board. Brown was previously a Flint City employee in the past five years and was not eligible under PA 72 to be an EFM.{{cite news|last=Longley|first=Kristin|title=Ed Kurtz returns as new Flint emergency financial manager; Loan Board reappoints EFMs in 3 other cities |url=http://www.mlive.com/news/flint/index.ssf/2012/08/appointed_new_flint_emergency.html|accessdate=30 January 2013|newspaper=The Flint Journal|date=August 8, 2012}} The Sugar Law Center filed to challenge PA 4 and PA 72. PA 4 was repealed by Michigan voters in the 2012 general election,{{cite news|last=Oosting|first=Jonathan|title= Michigan emergency manager law: What's next after Public Act 4 repeal? |url=http://www.mlive.com/politics/index.ssf/2012/11/michigan_emergency_manager_law.html |accessdate=30 January 2013|newspaper=MLive.com|date=November 11, 2012}} and the Michigan Legislature subsequently passed Public Act 436 of 2012 to replace the revived Public Act 72.

On May 1, 2013, the City of Ecorse was moved from under an emergency manager to a transition advisory board, which includes the previous emergency manager.{{cite news|last=AlHajal|first=Khalil|title=Ecorse escapes emergency manager, but state keeps oversight indefinitely|url=http://www.mlive.com/news/detroit/index.ssf/2013/04/ecorse_escapes_emergency_manag.html|accessdate=October 18, 2013|newspaper=Mlive Media Group|date=April 30, 2013 }} On July 2, a school district dissolution provision was passed into law allowing financially struggling school districts to be dissolved.{{cite news|title=Struggling school districts can be dissolved under new law|url=http://michiganradio.org/post/struggling-school-districts-can-be-dissolved-under-new-law|accessdate=November 19, 2013|work=Michigan Radio|date=July 3, 2013}} On July 18 with the Governor's authorization, Detroit's manager filed Chapter 9 bankruptcy.{{cite news|last=AlHajal|first=Khalil|title=Detroit pursues Chapter 9 municipal bankruptcy|url=http://www.mlive.com/news/detroit/index.ssf/2013/07/detroit_pursues_chapter_9_muni.html|accessdate=21 July 2013|newspaper=Mlive.com|date=July 18, 2013}} In August, a transition advisory board was appointed for the City of Pontiac which included the then emergency manager.{{cite news|last=AlHajal|first=Khalil|title=Advisory board replaces emergency manager in Pontiacy|url= http://www.mlive.com/news/detroit/index.ssf/2013/08/advisory_board_replaces_emerge.html |accessdate=October 18, 2013|newspaper=Mlive Media Group|date=August 19, 2013}}

For the City of Detroit, the state legislature passed a separate law forming a financial review commission to exercise financial check on city government as it exited bankruptcy and emergency management.{{cite news|last1=AlHajal|first1=Khalil|title=By midnight, Detroit exits bankruptcy and Emergency Manager Kevyn Orr leaves office|url=http://www.mlive.com/news/detroit/index.ssf/2014/12/by_midnight_detroit_exits_bank.html|accessdate=March 15, 2015|work=Mlive Detroit|publisher=MLive Media Group|date=December 10, 2014}}

As of June 27, 2018, there are no Emergency Managers in Michigan for the first time since 2000.{{Cite news|url=https://www.detroitnews.com/story/news/local/michigan/2018/06/27/michigan-no-emergency-managers-first-time-since-2000/737947002/|title=Michigan: No emergency managers for first time since '00|work=Detroit News|access-date=2018-07-31|language=en}}{{Needs update inline|date=April 2025}}

Public Act 101 of 1988 provided certain triggers for an initial review which included: failure to pay debts, failure to pay employee salaries, a request by local residents or officials, or request by a state legislator or state treasurer. If the review found that a financial emergency existed, the Local Emergency Financial Assistance Loan Board would make the appointment of an emergency financial manager for the governmental unit.{{cite news|title=7 things to know about Michigan's emergency manager law| url= http://www.michiganradio.org/post/7-things-know-about-michigans-emergency-manager-law |accessdate=30 January 2013|newspaper=Michigan Radio|date=December 6, 2011}} Public Act 72 of 1990 broadened the Emergency Financial Manager powers to handle all matters of finances of the city and provided a statute to also apply to public school districts.

Public Act 4 amended and expanded the procedure. The Michigan Department of Treasury would conduct a preliminary examination of troubled local governments. If "probable financial stress" were found, a financial review would be ordered. The Governor of Michigan and other officials would appoint the eight members of a financial review panel, which could report back to the Governor indicating that the local government is in "mild financial stress, severe financial stress or a financial emergency"{{cite news|last=Longley|first=Kristin|title=State panel reviewing Flint's finances asks for up to 30 more days |url= http://www.mlive.com/news/flint/index.ssf/2011/11/state_panel_reviewing_flints_f.html |accessdate=30 November 2011|newspaper=Flint Journal|date=November 4, 2011}} within 60 days. If a financial emergency existed but local officials had a viable plan to correct the situation, then the panel could recommend a consent agreement. Otherwise, the panel could recommend an emergency manager to take control of the local government.{{cite news|last=Longley|first=Kristin|title=State review panel recommends emergency financial manager be appointed in Flint |url=http://www.mlive.com/news/flint/index.ssf/2011/11/state_review_panel_recommends.html |accessdate=30 November 2011|newspaper=Flint Journal|date=November 8, 2011}} The Governor was given 10 days after the panel reported its findings to choose an option. The local government then had seven days to request a hearing by the Governor or his designee to appeal the decision. Local governments were required to pay the emergency manager.{{cite news|last=Oosting|first=Jonathan|title=Replacement emergency manager law, like right to work, would be immune from Michigan voter referendum|url=http://www.mlive.com/politics/index.ssf/2012/12/replacement_emergency_manager.html|accessdate=21 July 2013|date=December 11, 2012}}

The Local Financial Stability and Choice Act of 2012 includes several triggers for a preliminary review:

• board requesting a review via resolution,
• local petition of 5 percent of gubernatorial election voters requesting one,
• creditor's written request,
• missed payroll,
• missed pension payments,
• deficit-elimination plan breach or lack of such a plan within 30 days after its due day,
• a legislative request.Knake, Lindsay. (May 02, 2013) [http://www.mlive.com/news/saginaw/index.ssf/2013/05/michigan_department_of_educati_2.html Michigan Department of Education: Too early to tell what will happen to Saginaw County's Buena Vista School District]. The Saginaw News. Retrieved on September 4, 2013.

As with the previous law, various reviews are taken before any actions are made. The State Financial Authority, either the State Treasurer or Superintendent of Public Instruction, must provide an interim report within 20 days of creating a preliminary review to the local government. Then within 30 days, they must provide a final report to the Local Emergency Financial Assistance Review Board (ELB).[http://www.michigan.gov/treasury/0,1607,7-121-1751_51556-198770--,00.html How a Financial Emergency Works], Michigan Department of Treasury, retrieved on March 15, 2015. If the review finds a financial emergency exists, the local government is given four different choices: a consent agreement, chapter 9 bankruptcy, mediation or emergency manager.{{cite news| last=Oosting| first=Jonathan|title=Snyder signs replacement emergency manager law: We 'heard, recognized and respected' will of voters |url= http://www.mlive.com/politics/index.ssf/2012/12/snyder_signs_replacement_emerg.html |accessdate=30 January 2013|newspaper=MLive.com|date=December 27, 2012}} Under this law, the State government pays the manager's pay under this version. If an emergency manager is appointed, when the manager files his plan with the state, the local governing board may propose an alternative plan which the Local Emergency Financial Board will select which version the manager will implement. After one year, the manager may be removed by a 2/3 vote of the governing body.

A "transition advisory board" may be appointed after an emergency manager leaves a governmental unit and is to oversee the unit's finances.{{cite news|last1=Longley|first1=Kristin|title=Flint City Council letter to Gov. Snyder: 'We are on the wrong path' with emergency manager|url=http://www.mlive.com/news/flint/index.ssf/2013/01/flint_city_council_to_gov_snyd.html|accessdate=October 18, 2013|work=The Flint Journal|publisher=Mlive Media Group|date=January 22, 2013}} The law also allows the governor to impose a model charter or revise the existing one before the municipality exits receivership.Adams, Dominic. (September 22, 2013) [http://www.mlive.com/news/flint/index.ssf/2013/09/flints_charter_could_be_changi.html Uncharted waters: Next Flint emergency manager could radically change the way city is run]. Mlive Media Group: The Flint Journal. Accessed on October 18, 2013.

PA 72 provided statute for school districts to also come under Emergency Financial Manager. These powers were further extended under Public Act 10 of 1999, a separate state control arrangement, under which Detroit Public Schools operated from 1999 through 2005 during the John Engler administration for academic reasons.[http://www.mackinac.org/7556 Takeover of Detroit Schools Shows Few Intended Results] At the time the state assumed control in 1999, Detroit Public Schools had a budget surplus of nearly $115 million.{{cite web|title=2000 Comprehensive Annual Financial Support|url=http://detroit.k12.mi.us/data/finance/docs/2000.06.30_DPS_General_Purpose_Financial_Statements.pdf|website=Detroit Public Schools|accessdate=18 January 2016|archive-date=26 March 2016|archive-url=https://web.archive.org/web/20160326035606/http://detroit.k12.mi.us/data/finance/docs/2000.06.30_DPS_General_Purpose_Financial_Statements.pdf|url-status=dead}} At the end of the 2005 school year, the final year of the state's initial period controlling Detroit Public Schools, the district had accumulated a $31 million deficit.{{cite web|title=2006 Comprehensive Annual Financial Support|url=http://detroit.k12.mi.us/data/finance/docs/2006_Comprehensive_Annual_Financial_Report.pdf|website=Detroit Public Schools|accessdate=18 January 2016|archive-date=26 March 2016|archive-url=https://web.archive.org/web/20160326044141/http://detroit.k12.mi.us/data/finance/docs/2006_Comprehensive_Annual_Financial_Report.pdf|url-status=dead}}

Detroit Public Schools came under a financial emergency in 2009 under PA 72. With the expansion of emergency manager powers with PA 436, other schools have come under emergency management including school districts in the City of Muskegon Heights and City of Highland Park.[http://sugarlaw.org/wp-content/uploads/2013/05/Emergency-Manager-Timeline-Background-Facts.pdf Sugar Law] {{Webarchive|url=https://web.archive.org/web/20150402154453/http://sugarlaw.org/wp-content/uploads/2013/05/Emergency-Manager-Timeline-Background-Facts.pdf |date=2015-04-02 }},Sugar Law Center. May 2013. Retrieved March 15, 2015.

On July 2, 2013, a school district dissolution provision was passed into law allowing school districts that are financially struggling to be dissolved [http://michiganradio.org/post/struggling-school-districts-can-be-dissolved-under-new-law Struggling school districts can be dissolved under new law]. Michigan Radio. Accessed on November 19, 2013. by the state treasurer and state superintendentKnake, Lindsay. (July 18, 2013). [http://www.mlive.com/news/saginaw/index.ssf/2013/07/buena_vista_schools_partners_w.html Buena Vista schools partners with charter company Leona Group as possible dissolution looms]. The Saginaw News. Retrieved on August 16, 2013. with the intermediate school district splitting up the district's territory between neighboring school districts.Burns, Candace. (July 31, 2013) [http://www.abc12.com/story/22966432/sisd-officially-dissolves-buena-vista-schools SISD officially dissolves Buena Vista schools] {{webarchive |url=https://web.archive.org/web/20140818143459/http://www.abc12.com/story/22966432/sisd-officially-dissolves-buena-vista-schools |date=August 18, 2014 }}. ABC12. Retrieved on August 16, 2013. Dissolved school districts become a tax-collecting unit, under the intermediate school district's control, to pay off debts.Knake, Lindsay. (July 11, 2013) [http://www.mlive.com/news/saginaw/index.ssf/2013/07/buena_vista_school_district_ow_1.html Buena Vista School District could keep collecting taxes after dissolution to repay debt]. The Saginaw News. Retrieved on August 16, 2013.

;Dissolved school districts

• Buena Vista School District (Michigan), July 30, 2013
• Inkster Public Schools, July 25, 2013Smith, Brian. "[http://www.mlive.com/education/index.ssf/2013/07/inkster_first_schools_to_be_di.html Inkster schools first to be dissolved; students split across 4 districts]." Mlive. July 26, 2013. Retrieved on November 2, 2013.

The Local Emergency Financial Assistance Loan Board (ELB) is ex officio formed board consisting of the State Treasurer of Michigan, director of licensing and regulatory affairs and the Director of Technology, Management and Budget as members or their respective designees.[http://www.michigan.gov/treasury/0,4679,7-121-1755_1963-338273--,00.html ELB approves Detroit financing proposals, land transfer], Michigan Department of Treasury, Retrieved on March 15, 2015. The board selects the emergency manager and chooses between the emergency manager's cost-cutting plan and the local unit board's alternative plan. The ELB approves all major financial decisions over $10,000 while a municipality is under emergency management, including transfers of publicly owned assets.{{citation needed|date=March 2015}}

An emergency manager, formerly an emergency financial manager, is an official appointed by the governor to take control of a local government under a financial emergency in the State of Michigan and is not the same as an emergency manager as defined by the International Association of Emergency Managers (IAEM) and the U.S. Department of Labor job classification.{{Cite web|url=https://www.bls.gov/ooh/management/emergency-management-directors.htm|title=Emergency Management Directors : Occupational Outlook Handbook: : U.S. Bureau of Labor Statistics}} A manager temporarily supplants the governing body, chief executive officer, or chief administrative officer of the local government and has the authority to remove any of the unit's elected officials should they refuse to provide any information or assistance.https://www.michigan.gov/documents/snyder/EMF_Fact_Sheet2_347889_7.pdf {{Bare URL PDF|date=March 2022}} Managers have complete control over the local unit with the ability to reduce pay, outsource work, reorganize departments and modify employee contracts.{{cite news|last=Longley|first=Kristin|title=Other emergency managers provide glimpse of what Flint can expect under state takeover |url=http://www.mlive.com/news/flint/index.ssf/2011/11/other_emergency_managers_provi.html |accessdate=30 November 2011|newspaper=Flint Journal|date=November 18, 2011}} Emergency managers assigned to school districts may transfer failing schools to the Education Achievement Authority.{{cite news|last=Higgins|first=Lori|title=State district for failing schools may expand past DPS earlier than planned|url=http://www.freep.com/article/20111205/NEWS05/112050321/State-district-failing-schools-may-expand-past-DPS-earlier-than-planned|accessdate=5 December 2011|newspaper=Detroit Free Press|date=Dec 4, 2011}}

• Bankruptcy
• Detroit (in addition to emergency manager) ({{dts|2013|7|21}}-{{dts|2014|12|10}})
• Consent agreements
• Inkster, March 2012-Oosting, Jonathan. (March 09, 2012) [http://www.mlive.com/news/detroit/index.ssf/2012/03/gov_snyder_agrees_with_review.html Gov. Snyder approves consent agreement -- not emergency manager -- for Inkster]. Mlive.com. Accessed on November 3, 2013.
• Detroit (March 2012- ) Oosting, Jonathan. (March 13, 2012) [http://www.mlive.com/news/detroit/index.ssf/2012/03/state_treasury_to_present_detr.html#incart_river_default State Treasury to present Detroit City Council with language of proposed consent agreement]. Mlive.com. Accessed on November 3, 2013. -August 8, 2012
• Pontiac Public Schools[http://michigan.gov/treasury/0,4679,7-121-1751_51556_64472-201116--,00.html Emergency Manager Information]. Michigan Department of Treasury. Accessed on November 4, 2013.
• Court order receivership
• Ecorse (1986-1990)
• Financial review commission
• Detroit
• Transition advisory board
• Ecorse (May 1, 2013 – present)
• City of Pontiac (August 2013 – present)
• City of Allen Park (September 2014 – present){{cite news|last1=Kalish|first1=Jenny|title=Special Transition Advisory Board meeting in Allen Park set for Thursday|url=http://www.thenewsherald.com/articles/2015/03/10/news/doc54ff3fb6b663b564073311.txt|archive-url=https://web.archive.org/web/20160304052410/http://www.thenewsherald.com/articles/2015/03/10/news/doc54ff3fb6b663b564073311.txt|url-status=dead|archive-date=March 4, 2016|accessdate=March 19, 2015|work=The News-Herald|date=March 10, 2015}}
• City of Flint ({{dts|2015|4|30}}{{cite news|last1=Fonger|first1=Ron|title='A heavy burden' lifted from Flint as Gov. Rick Snyder declares end of financial emergency|url=http://www.mlive.com/news/flint/index.ssf/2015/04/a_heavy_burden_lifted_from_fli.html|accessdate=July 18, 2015|work=Flint Journal|publisher=Mlive Media Group|date=April 29, 2015}}-{{dts|2019|1|11}}{{cite news |last1=Goodin-Smith |first1=Oona |title=State board OKs giving financial powers back to Flint officials |url=https://www.mlive.com/news/flint/2018/01/flint_rtab_moves_to_return_dai.html |accessdate=14 January 2020 |work=MLive.com |date=11 January 2019}} )

{{portal|Michigan}}

• Chapter 9, Title 11, United States Code, a chapter of the United States Bankruptcy Code, available exclusively to municipalities, that assists them in the restructuring of debts.
• Education Achievement Authority, a Michigan statewide school system for failing schools
• Municipal Assistance Corporation, New York State receivership agencies

{{Reflist}}

• [http://michigan.gov/treasury/0,4679,7-121-1751_51556---,00.html Local Government Fiscal Health], State of Michigan Department of Treasury website central page regarding financial emergencies and local unit audits

{{Detroit Public Schools|state=collapsed}}

Category:Government of Michigan

Category:United States bankruptcy law

Category:Local government in Michigan