Legislative report for the Emergency Financial Manager Bills

 

The governor recently signed the Emergency Financial Manager (EFM) bills.  An Emergency Financial Manager could be placed into a municipality or school district that is struggling financially.  The EFM would have the power to:

·         Take over a pension only if a pension fund is less than 80% funded.  Once an EFM takes over a pension board they could get rid of the board and move the pension to the Municipal Employee Retirement System (MERS);

·         Cancel/change terms of any contract;

·         Void any ordinance;

·         Relieve local officials of pay and responsibilities;

·         Prohibit employees access to their office and their email;

·         Have control over academics and close school buildings;

·         Order millage elections;

·         Consolidate and eliminate departments;

·         Recommend that a municipality merge with another municipality;

·         Sell property, including parks; and

·         Eliminate busing (but not for children receiving special education services) and sports in a school district.

 

Other aspects of the bill includes:

·         Before the EFM leaves, they are required to put in place a two year budget that the locals cannot change;

·         There is no limit on the pay of an EFM;

·         The EFM not only has immunity for the actions they take, if they are sued the locals have to pay for their defense;

·         The locals also have to pay for an EFM’s salary, professional liability, workers compensation, and vehicle insurance;

·         There are no triggers that would cause an end of service to an EFM, they serve at the pleasure of the State Treasurer (Andy Dillon);

·         An EFM signs a contract with the State Treasurer and the contract has to be posted on the Treasurer’s website (but locals are not allowed to make any changes to the contract); and

·         Any collective bargaining agreement has to include a clause that states if an EFM is in place they realize that their contract can be null and void.

Under the bill, the state financial authority of a local government may conduct a preliminary review to determine if a local government financial problem exists if:

1.               The local governing body or chief administrative officer requests a preliminary review;

2.               The state financial authority (state treasurer for a municipal government, state superintendent of public instruction for a school district) receives a written request from a creditor with an undisputed claim that is unpaid six months after its due date and exceeds $10,000 or 1% of the annual general fund budget of the local unit;

3.               The state financial authority receives a petition signed by registered electors of the local unit totaling at least 5% of the total votes cast for governor in that jurisdiction.  The petition must contain specific allegations of financial distress;

4.               The state financial authority is notified that the local unit has not made its minimum obligation payment to the local government pension fund;

5.               The state financial authority receives written notice that the local unit has failed to pay (for at least 7 days) wages, salaries or other compensation to employees or benefits to retirees;

6.               The state financial authority receives written notice from a bondholder, trustee, paying agent or auditor that there is a default in a bond or note payment;

7.               The state financial authority receives a resolution from either the House or the Senate;

8.               The local unit has violated the revenue bond act or municipal finance act;

9.               The local unit has violated conditions of an order issued by the local emergency financial assistance loan board;

10.           The local unit has violated a requirement of the uniform budgeting and accounting act;

11.           The local unit fails to file an annual financial report or audit in a timely manner;

12.           A municipal government is delinquent in distributing tax revenue it has collected for another taxing jurisdiction;

13.           A local unit is in breach of its deficit elimination plan;

14.           A court has ordered an additional tax levy without approval of the local governing body;

15.           A local unit has ended a fiscal year in deficit;

16.           A school district has ended the year in deficit and has not submitted a deficit elimination plan within 30 days of the deadline;

17.           A local unit has been assigned a long term debt rating below the BBB category; and

18.           The existence of other facts of circumstances that in the state treasurer’s (or superintendent’s) sole discretion is indicative of financial stress.