Perhaps no piece of statewide legislation has been more controversial in Michigan than 2011's Public Act 4, which allowed the state to appoint an emergency manager to take over finances and day-to-day decisions of struggling cities and school districts. Critics fought back hard, collecting over 200,000 signatures to freeze the law and place a referendum on the Nov. 6 ballot. Michigan Gov. Rick Snyder, a Republican who signed PA 4 into law, is actively campaigning in support of upholding the legislation.
"I am trying to stay in my lane," Snyder said in a recent interview with The Huffington Post. "I'm not here to run these cities. I'm here to create an environment where I can help them succeed better and give them resources."
Originally written as Public Act 101 in 1988, and later strengthened as Public Act 72 in 1990, Public Act 4 of 2011 expanded the state's power over municipalities, making it even easier for the state to assess troubled bureaucracies and seize control. The law offers a broad leap to give financial managers power over books, not just budgets.
If approved by voters, PA 4 would be Michigan's most sophisticated -- and potent -- response to cities and districts that are seemingly handcuffed by financial obligations and debt. Managers would regain the authority to dismiss governmental councils and bodies and renegotiate contracts. In schools, they could shape curricula.
Critics say the law subverts democracy by stripping power from local elected officials, since emergency managers don't have to answer to citizens -- their boss is the governor. Snyder has said assuming state control protects residents from living in a city that can’t afford services or schools; he also thinks the law protects the interests of all Michiganders.
"If we hadn't had an EM, I believe we would have been better off. That's the problem with the law. It doesn't fix the core issue. Property taxes have declined, you have cities with high unemployment because plants and other things left and nobody wants to create jobs in these areas. That's what it comes down to." -- Pontiac City Councilman Kermit Williams to MLive, September 2012
Of the cities under state control, Snyder says the biggest commonality is declining population -- but that's not a new problem in Michigan. "It's been a rough 50 years, let alone the last decade," he said.
Cities' pension plans and union contracts were negotiated with terms better suited to Michigan's more successful and prosperous past, Snyder says, a problem municipalities face nationwide.
"I think this is a national problem. I think cost structures in the public sector got beyond even the private sector in terms of being expensive," he said. For Michigan's municipal officials, "the path they had been on very consistently for decades was to continue going downhill. They were not successfully managing their cities. That's how they got in the crisis to begin with."
The elected officials replaced by the governor's appointed managers see it differently. They argue cities may not have fully funded their pension plans or kept their costs in check, but they didn't plan for plummeting property values and declining tax revenues brought on by the Great Recession, either.
And some opponents of PA 4 -- including U.S. Rep. John Conyers of Detroit, who asked the federal Justice Department to review the law -- argue it has been applied in a discriminatory fashion. All but one of the cities and school districts currently operating under an emergency manager or consent agreement enabled by PA 4 -- Detroit, Detroit Public Schools, Flint, Benton Harbor, Ecorse, River Rouge, Highland Park, Muskegon Heights Public Schools and Inkster -- have majority African-American populations.
Michigan's overall population is 80 percent white. With a statewide referendum, it's possible that majority of white voters could help affirm a law that affects the lives of 650,000 Michigan residents, the majority of whom are African-American or Hispanic.
DO THE JOB, THEN GET OUT
The 'threat to democracy' can be defined as taking control away from local elected officials and investing that control in an unelected official who is not directly responsible to residents of the local unit. It could also be argued, however, that a threat to democracy occurs when local elected officials fail to manage at a minimally acceptable level, fail to be adequate stewards of the public trust, and fail to avoid a financial emergency." -- Memorandum from the Citizens Research Council of Michigan, September 2012
By strengthening emergency managers' powers, PA 4 in theory allows someone who isn't beholden to voters to make the kinds of tough choices necessary to steer cities out of a financial storm. Snyder believes citizens are the better for it. "They actually deserve better, in terms of more efficient service and better service," he said.
PA 4's early warning system allowed a state review team to assess the finances of Allen Park, the latest city to fall under state control, before the city became insolvent. "That was one of the problems with the old law," says Snyder. "It didn't have an early warning system. In some of these cases, they could simply show up and hand us the keys to the city and say, 'Good luck.'"
Many Allen Park residents blame the city's fiscal crisis on its 2009 investment in Unity Studios, a movie-making venture that failed to the tune of $31 million. Yet City Councilman Dennis Hayes told the Detroit News he felt an emergency manager appointment was inevitable, "due to the huge structural problems we have, beyond the failed movie studio. Our legacy costs and labor agreements are unsustainable, in my view."
To Snyder, PA 4 offers a necessary improvement on PA 72 because it allows his appointees to act as the sole agent of the government in any collective bargaining agreement and to restructure or amend any agreements. Those are two tasks, he argues, that cities in crisis aren't equipped to handle alone.
But while stronger emergency managers can be more ruthless, Snyder sees their oversight as a temporary fix. Emergency managers have two short term goals: navigating a municipality to fiscal stability and improving services to citizens. "The point is, get it stable so it has an opportunity to grow, and then let the community decide," he said.
Snyder believes that Ecorse and Pontiac, two cities that have each been under state control since 2009, may be fiscally healthy enough to manage themselves within six months. Detroit Public Schools, on the other hand, have been under state control just as long, and there's no end in sight.
"In some cases, they were there longer than I would have liked them to be there," Snyder said of the emergency managers in DPS. "That was part of the problem with PA 72. They didn't have clear enough authority and broad enough authority, to come do their jobs, and then get out."
Given the circumstances, fairness demands that everyone share in the sacrifices that are necessary. City workers, pensioners and residents are all feeling the pain. Why shouldn't the bondholders, to employ a widely used euphemism, get a 'haircut' along with everyone else?" -- Curt Guyette, "Underwater," The Metro Times, Aug. 8, 2012
The threat of bankruptcy is the final card on the table in the debate over how best to save Michigan's cities from insolvency. Critics of PA 4 say the emergency manager system ensures banks and investors are always repaid in full, while workers and ordinary citizens have to make do with less. But declaring Chapter 9 municipal bankruptcy doesn’t let a city simply default on its obligations to bondholders.
In Jefferson County, Ala., which filed for bankruptcy earlier this year, bondholders are suing for repayment of more than $3 billion. For cities already deemed credit risks, a default would almost assuredly destroy their chances of issuing further bonds without the state as a lending partner.
Snyder, a former accountant and former CEO of Gateway Computers, says he's worried about the uncertainty of municipal bankruptcy law, which lags in comparison to the bounty of case law for private sector bankruptcies. "The challenge is the history and the track record is not really good," he said. "It's where you have to ask what works in theory, versus what's pragmatic."
"Theoretically, if you were able to do Chapter 9 in an efficient fashion, in a structured fashion, where you had everything lined up, you could actually address some of those issues, probably in a more total approach," he reasoned. "But the track record, so far, has been pretty dismal. And the associating stigma of what it does, trying to get people to go there in the interim, is even worse."
Instead of fighting the reality of a state takeover, Snyder said cities should focus on creating a positive, long-term vision for when they regain power. "In Detroit, in particular, I've been pounding this drum," he said. "What are the things that are going to attract and retain young people? The neighborhood plan -- how we need to revitalize the neighborhoods."
"I've actually said this quite often," he added. "But I'm only the governor."
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Below, take a look at the other important proposals on Michigan's ballot.
Prop 1: Emergency Manager Referendum
Proposal 1 is a referendum on <a href="http://www.huffingtonpost.com/2012/03/16/public-act-4-michigan-emergency-manager-law-anniversary_n_1353510.html">Public Act 4 of 2011</a>, which means voters are being given an opportunity to keep the law or vote it down. The act is also known as the emergency manager law because it allows the governor to to appoint an official known as an emergency manager (EM) to act in place of local government officials, if a financial emergency is found to exist. The law also sets standards to determine whether or not local government entities (including a school districts) are in financial distress; requires EMs to develop financial and operational plans to resolve a fiscal crisis and gives them special authority to modify or terminate contracts, reorganize government, and determine expenditures, services, and use of assets to achieve that goal; and also allows a state-appointed review team to enter into an agreement with a local government called a consent decree to resolve a financial emergency. Although Public Act 4 was passed last year, it's temporarily on hold due to state rules governing ballot referendums. A 'YES' vote on the referendum would reinstate the law. <em>Pictured:<a href="http://www.huffingtonpost.com/2012/02/29/michigan-emergency-manager-repeal_n_1311582.html"> Members and supporters of the referendum on Public Act 4 drop off boxes of petitions in Lansing in February 2012</a>.</em> (File photo: David Sands/HuffPost)
Prop 1: Pro
The Michigan Chamber of Commerce supports Proposal 1 and keeping PA 4 on the books. "Repeal of this important reform, through ballot initiative, legislative or legal action would severely hinder state government’s effort to improve the fiscal health of local governments and public schools," <a href="http://www.michamber.com/faq/2012-ballot-proposals-0">the organization said in a statement on it's website</a>. <em>Video: Michigan Lieutenant Governor Brian Calley explains the impact of Proposal One on Michigan's emergency manager law.</em>
Prop 1: Con
The group Stand Up For Democracy gathered petitions to hold this referendum and vote down Public Act 4. Here's what they say about the law: "This is just a power grab by politicians in Lansing. Political opponents of local officials don't have to beat them in elections. They can just get Governor Snyder and politicians in Lansing to take away power and put their people in place, people who support their political agenda – not the needs of people in the community. We need our leaders to come together to find solutions, not take away voting rights and strip decision-making power from local communities." <em>Video: "Dictators Over Communities of Color"</em>
Prop 2: Collective Bargaining
This proposal would amend Michigan's constitution to grant public and private-sector employees the right to organize and collectively bargain through unions. It would void existing or future state or local laws restricting workers ability to organize unions, or to negotiate and enforce collective bargaining agreements, including employees’ financial support of their labor unions. It would, however, still permit laws to be made that prohibit public employees from striking. The amendment would also override state laws regulating hours and conditions of employment to the extent that those laws conflict with collective bargaining agreements. Under the law, an "employer" would be defined as any person or entity employing one or more people. <em>Pictured: Detroit wastewater treatement plant workers and supporters <a href="http://www.huffingtonpost.com/2012/10/05/detroit-water-strike-union-ends-department_n_1943279.html">walk the picket line during a strike in October 2012</a>.</em> (File photo: David Sands/HuffPost)
Prop 2: Pro
The group <a href="http://protectworkingfamilies.com/">Protect Working Families</a> supports Proposal 2. "That protection is needed because corporate special interests are pressuring Lansing politicians to eliminate collective bargaining," reads a release from the group. "Collective bargaining gives a voice to working families to negotiate for fair wages, benefits and safer working conditions that are good for us all."
Prop 2: Con
The organization <a href="http://handsoffourconstitution.com/">Citizens Protecting Michigan’s Constitution</a> opposes proposal 2. The following is a statement from their website. "This proposal is a deceitful measure that will enhance perks to special interests at the expense of taxpayers. This long and complicated proposal is a union boss wish list of policy ideas that would turn back the clock to the days when union bosses called the shots in Michigan."
Prop 3: Renewable Energy
Michigan's constitution would also be amended under Proposal 3, a ballot measure that would make the state's utilities comply with a new standard for renewable energy. The amendment would set a deadline of 2025 to require electric utilities to generate at least 25 percent of their annual retail sales of electricity from renewable energy sources, which include wind, solar, biomass, and hydropower. It would limit electric utility rate increases charged to consumers only to achieve compliance to not more than one percent per year. It would also allow annual extensions of the deadline to meet the 25 percent standard in order to prevent rate increases over the 1 percent limit and require the legislature to enact additional laws to encourage the use of Michigan-made equipment and employment of Michigan residents. (File photo:AP/Ferdinand Ostrop)
Prop 3: Pro
The group <a href="http://mienergymijobs.com/">Michigan Energy, Michigan Jobs</a> argues Prop 3 would help create a clean energy industry in Michigan while helping the environment. "Using more wind and solar energy will reduce pollution and give Michigan cleaner and healthier air and water, protect the Great Lakes, reduce asthma and lung disease and ultimately save lives," reads a statement on the Michigan Energy, Michigan Jobs website.
Prop 3: Con
Citizens Protecting Michigan’s Constitution says in a statement on its website that Prop 3 "is likely to increase energy costs dramatically in the future and is a dishonest attempt by investors to cash in on the energy market through our Constitution." The site notes that Michigan already has a law on the books promoting renewable energy (<a href="http://apps1.eere.energy.gov/news/news_detail.cfm/news_id=12029">10 percent by 2015</a>) and argues that rather than "lock anyone’s idea in the constitution," Michigan voters should be "flexible" on the issue of how power is generated.
Prop 4: Home Care Council
This proposal would amend the state constitution to create a governmental body called the Michigan Quality Home Care Council and allow for limited collective bargaining for home health care workers. The council would be responsible for training home health care workers, creating an employee registry, holding background checks, and offering financial services to patients to manage the costs of care. If passed, the measure would also authorize the council to set minimum compensation standards and terms and conditions of employment. The non-partisan Citizen's Research Council of Michigan <a href="http://www.crcmich.org/PUBLICAT/2010s/2012/memo1119.pdf">estimates the amendment would impact around 42,000 in-home care workers</a> hired by participants in the the Home Help Services Program, which is funded by Medicaid and paid through the Michigan Department of Community Health. The new council would play a role similar to a body called the<a href="http://www.natlawreview.com/article/fight-over-unionization-michigan-home-health-care-workers-continues-federal-court-an"> Michigan Quality Community Care Council that was defunded by the state legislature in 2011</a>. Under that setup, home health care workers were classified as public employees, which allowed Service Employees International Union Healthcare Michigan to collect dues from their wages. State legislators passed a law changing this classification to deny it union representation, but a federal judge later passed an preliminary injunction on the law until SEIU's contract expires in 2013. Proposal 4 would create a new body that would fill a similar role to the previously established council. (File photo: Alamy)
Prop 4: Pro
The group <a href="Pro: http://www.keephomecaresafe.org/">Citizens for Affordable Quality Home Care</a> supports Proposal 4. A statement on its website says the amendment "would give all Michiganders – including seniors and persons with disabilities – the choice to direct their own care in their own homes, instead of forcing them into expensive nursing homes or institutions."
Prop 4: Con
Proposal 4 is opposed by the group <a href="http://handsoffourconstitution.com/#issue-1">Citizens Protecting Michigan’s Constitution.</a> A statement on its website says, "This proposal isn’t about quality of health care. This is about cash going to the union SEIU for them to spend on a political agenda." <em>Video: Mackinac Center analysis of Prop 4</em>
Prop 5: 2/3rds Majority Tax Amendment
This measure would amend the state constitution to change how the state government puts new taxes in place. It would require either a two-thirds majority vote in the State House and the State Senate, or a statewide vote of the people at a November election to raise taxes. The measure would apply to new or additional taxes, the expansion of tax bases, and rate increases. It would not limit or modify tax restrictions already in the state constitution. (File photo: State of Michigan)
Prop 5: Pro
Proposal 5 is supported by <a href="http://miprosperity.com/twothirds-movement/">The Michigan Alliance For Prosperity</a>, which on its website says: "The two-thirds majority initiative protects Michigan taxpayers by encouraging better cooperation between elected officials, fewer increases in our taxes, responsible discussion across party lines and a greater emphasis on reform, prioritization of spending and fiscal responsibility." (File Photo: AP Photo/Seth Perlman)
Prop 5: Con
<a href="http://defendmidemocracy.com/the-supermajority-scheme/">Defend Michigan Democracy</a> opposes the measure. In a statement on its website, the group says: "Proposal 5 is almost entirely funded by a lone Detroit billionaire, Matty Moroun. He spent nearly $2.3 million to buy enough signatures of Michigan voters to put the proposal on the Nov. 6 ballot. ... This plot is to buy a constitutional amendment that would protect tax policies that benefit billionaire Moroun and other special interests at the expense of Michigan’s future prosperity and local taxpayers."
Prop 6: International Bridges And Tunnels Amendment
If Prop 6 becomes law it will amend the state constitution in regards to the construction of international bridges and tunnels. The measure would require approval from a majority of voters in a statewide election and in every municipality where “new international bridges or tunnels for motor vehicles” are to be located. The votes would be needed to allow the State of Michigan spend state funds or resources for acquiring land, designing, soliciting bids for, constructing, financing, or promoting new international bridges or tunnels. The proposal would define “new international bridges or tunnels for motor vehicles” as “any bridge or tunnel which is not open to the public and serving traffic as of January 1, 2012.” The ballot measure concerns an effort to construct a new bridge over the Detroit River connecting the U.S. and Canada, which is known as the <a href="http://www.huffingtonpost.com/2012/06/12/new-international-trade-crossing-bridge-detroit-michigan-canada_n_1590759.html">New International Trade Crossing (NITC)</a>. Canada <a href="http://www.huffingtonpost.com/2011/11/16/ambassador-bridge_n_1096366.html">has offered to pay $550 million for Michigan's share of expenses</a> for the construction of the <a href="http://www.huffingtonpost.com/2012/06/12/new-international-trade-crossing-bridge-detroit-michigan-canada_n_1590759.html">estimated $2.1 billion bridge</a>. The crossing has been supported by Gov. Snyder, but has been opposed by Ambassador Bridge owner Manuel "Matty" Moroun. (File Photo/Artist Rendering: AP/Michigan Department of Transportation)
Prop 6: Pro
The group <a href="https://thepeopleshoulddecide.box.com/s/yk6zw6j0h0mdf9dqb89p">The People Should Decided Ballot Committee</a>, supports the proposal 6. A statement on their website reads: "The bottom line is there is tremendous risk associated with committing public dollars to such a massive infrastructure project. ... With so much on the line for Michigan taxpayers, simple prudence demands that everyone whose tax dollars are at risk be given an opportunity for his or her voice to be heard."
Prop 6: Con
Lt. Gov. Brian Calley opposes the ballot measure and supports the construction of the NITC, <a href="http://www.mlive.com/politics/index.ssf/2012/10/michigan_decides_2012_proposal.html">he told MLive</a>: “The proposal is really nothing more than a delay tactic and effort by one special interest to abuse our constitution to provide protection for his monopoly.” <em>Video: Michigan Lt. Gov. Brian Calley.</em>
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