THE BLOG
03/16/2012 11:41 am ET Updated May 16, 2012

The Missing Links That Are Essential to Recovery

Is the State of Michigan obligated to intervene when a financially troubled community, which fails to resolve its financial difficulties, threatens to materially affect the public health, safety, and welfare of its citizens and that of others by its inability to ensure the provision of essential governmental services?

Is the State of Michigan obligated to protect the credit of the state and its political subdivisions?

Is it right for the public good and a valid public purpose for the state to intercede into the affairs of local governments and school districts that are experiencing financial distress?

What are the potential ramifications to the communities in question, other communities, and the state itself, if the state does not intercede to prevent defaults on bonds, payless paydays for employees, or non-payment of healthcare benefits for employees and retirees?

If the state's involvement in the affairs of insolvent communities is appropriate, what should the extent of that involvement be? Should assistance be restricted to providing loans and grants to communities that have demonstrated no capability or no viable plan to address their financial dilemmas?

No patent remedy can be devised to address the insolvencies of local governments and school districts that would be acceptable to everyone. But remedies are likely to be more acceptable if our state addresses insolvencies, rather than bankruptcy courts.

Public Act 4 of 2011 (PA 4) provides an opportunity for the state to assist local governments and school districts to remedy the conditions that contribute to their financial distress. To abort PA 4, before it has been allowed an opportunity to be assessed, based on its performance, would be unfortunate, not only for the very communities it is specifically designed to help, but for other communities that would benefit indirectly.

PA 4 allows local governments and school districts to develop financial and operational structures and strategies that will enable them to remain solvent after the financial emergencies have been resolved. Sustainable change is not just about getting the finances right. It's about rectifying the deficiencies ingrained within the organizations' systems. If we focus only on the financial issues, we address the symptoms, rather than the causes. PA 4, through the appointment of emergency managers to local governments and school districts, provides for sustainable solutions.

Emergency managers provide the missing links that are essential to the recovery of financially distressed governments: (1) financial and operational expertise to correct the underlying problems associated with the distress; and (2) an unbiased, nonpolitical commitment to do what is right and necessary.

By providing for temporary intervention by the state to assist communities in developing permanent solutions to resolve their financial distress, PA 4 benefits local governments, school districts, their constituents, their employees, their pensioners, their vendors, their creditors, and others that would be affected directly and indirectly due to the repercussions of the affected communities' financial distress.

For these reasons, I strongly endorse the act.