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2011 Senate Bill 865: Replace repealed "Emergency Manager" law

Public Act 436 of 2012

  1. Introduced by Sen. Phil Pavlov (R) on December 1, 2011, to authorize the appointment by the state of transition advisory boards for fiscally-failed local governments that have been “rehabilitated” and are coming out of a receivership managed by a state-appointed emergency manager. The boards would have veto power over budgets, union agreements and new borrowing.
    • Referred to the Senate Government Operations Committee on December 1, 2011.
      • Reported in the Senate on December 14, 2011, with the recommendation that the substitute (S-1) be adopted and that the bill then pass.
    • Substitute offered in the Senate on December 15, 2011, to replace the previous version of the bill with one that eliminates its previous provisions and leaves it as a "placeholder" or potential "vehicle" bill for extending the Emergency Manager law passed earlier in 2011; see Senate-passed version for details. The substitute passed by voice vote in the Senate on December 15, 2011.
  2. Passed 26 to 12 in the Senate on December 15, 2011, to pass a "shell" version of this bill with no substantive provisions, but which can be modified later to extend the Emergency Manager law passed earlier in 2011 the event it is suspended in 2012 pending a potential referendum in November. This possibility was triggered by a statewide petition drive reportedly orchestrated by government employee unions unhappy with the power given to emergency managers appointed under that new law to throw out collective bargaining agreements they believe a fiscally failed municipality cannot afford.
    Who Voted "Yes" and Who Voted "No"

  3. Received in the House on December 15, 2011.
    • Referred to the House Government Operations Committee on December 15, 2011.
      • Reported in the House on December 6, 2012, with the recommendation that the substitute (H-5) be adopted and that the bill then pass.
    • Substitute offered in the House on December 12, 2012. The substitute failed by voice vote in the House on December 12, 2012.
    • Substitute offered by Rep. Al Pscholka (R) on December 12, 2012, to adopt a substitute that contains a substantive proposal; see House-passed bill for details. The substitute passed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Maureen Stapleton (D) on December 12, 2012, to add additional reporting and procedural steps to the fiscal emergency process. The amendment passed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Maureen Stapleton (D) on December 12, 2012, to prohibit an emergency manager appointed to a fiscally-failed city from selling its municipal water system without a vote of the residents. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Maureen Stapleton (D) on December 12, 2012, to restrict the authority of an emergency manager to replace trustees of an underfunded municipal pension system to cases where the system is only 70 percent funded, rather than a proposed 80 percent threshold. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Maureen Stapleton (D) on December 12, 2012, to exempt Detroit from a provision giving an emergency manager the power to replace trustees of a city pension fund that is less than 80 percent funded. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Woodrow Stanley (D) on December 12, 2012, to strip out a provision that adds a modest appropriation, which under a state Supreme Court ruling several years ago has the effect of making the bill "referendum-proof". The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Jon Switalski (D) on December 12, 2012, to increase the deadline for feeback from municipal officials that is part of the procedures for declaring a fiscal emergency that would trigger the proposed law. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Woodrow Stanley (D) on December 12, 2012, to establish that the state review team tasked with reviewing the finances of a fiscally failed city or school district prior to triggering the proposed law would be subject to the state Open Meetings Act and Freedom of Information Act. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Woodrow Stanley (D) on December 12, 2012, to style a public information meeting required as part of the financial emergency review process as a "hearing". The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Maureen Stapleton (D) on December 12, 2012, to strip out a provision giving the state Treasurer the power to declare at his sole discretion that a fiscally failed city government that has entered a "consent agreement" proposed by bill has committed a "material breach" of that agreement. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Woodrow Stanley (D) on December 12, 2012, to exempt for five years a city or school district that has had an emergency manager appointed from the mandate in the Public Employment Relations Act (PERA) to engage in collective bargaining with government employee unions. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Jon Switalski (D) on December 12, 2012, to eliminate a hard deadline on a fiscally failed local government choosing the mediation alternative proposed by the bill, or else having an emergency manager appointed. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Jon Switalski (D) on December 12, 2012, to remove a provision that gives a state "emergency financial assistance loan board" the final say on an action proposed by an emergency manager which is disputed by the local government. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Woodrow Stanley (D) on December 12, 2012, to strip out a provision that gives an emergency manager the power to invalidate a government employee union contract provision. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Jim Townsend (D) on December 12, 2012, to strip out a provision that gives an emergency manager the power to invalidate a provision of a government employee union contract. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Jon Switalski (D) on December 12, 2012, to strip out a provision that includes among a emergency manager's duties creating a financial reform plan that may require invalidating provisions of a government employee union contract. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Woodrow Stanley (D) on December 12, 2012, to strip out a provison exempting fiscally-failed local governments and school districts that enter a financial reform consent agreement with the state from the law that forces locals and schools to engage in collective bargaining with unions, during the term of the consent agreement. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Jim Townsend (D) on December 12, 2012, to remove a requirement that a local government determined to be in a financial emergency to select one of the options offered by the bill even if it has voted with a two-thirds majority to appeal the determination. The amendment failed by voice vote in the House on December 12, 2012.
    • Amendment offered by Rep. Jim Townsend (D) on December 12, 2012, to revise a provision automatically ending a mediation effort if the state treasurer determines it will not generate sufficient savings to resolve the financial emergency, and instead just allow the treasurer to advise the local's governing board of this shortcoming. The amendment failed by voice vote in the House on December 12, 2012.
  4. Passed 63 to 46 in the House on December 12, 2012, to replace the Emergency Manager law passed in 2011 and repealed by a statewide referendum with a new law, which will give fiscally-failed cities or school districts a choice of either entering a reform plan consent agreement with the state, entering mediation to create such a plan, being allowed to declare bankruptcy in federal court, or having an emergency manager appointed with powers similar to those that triggered the union-sponsored referendum (to invalidate unaffordable or unsustainable government union contracts). The replacement also adds a public information meeting requirement to the process; specifies procedures and conditions for exiting the financial emergency; explicitly gives a school EM authority over academic matters; and contains a modest appropriation that makes it "referendum-proof".
    Who Voted "Yes" and Who Voted "No"

  5. Motion by Rep. Jim Stamas (R) on December 12, 2012, to give immediate effect. The motion passed 64 to 45 in the House on December 12, 2012.
    Who Voted "Yes" and Who Voted "No"

  6. Received in the Senate on December 12, 2012.
    • Substitute offered by Sen. Bert Johnson (D) on December 13, 2012, to adopt a version of the bill that would reduce the powers of the state in reforming fiscally failed cities and school districts, and limit state involvement to two years. The substitute failed 12 to 26 in the Senate on December 13, 2012.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Sen. Bert Johnson (D) on December 13, 2012, to add a provision that would have the effect of ensuring that the bill can never go into effect. The amendment failed 12 to 26 in the Senate on December 13, 2012.
      Who Voted "Yes" and Who Voted "No"

  7. Passed 23 to 15 in the Senate on December 13, 2012, to replace the Emergency Manager law passed in 2011 and repealed by a statewide referendum with a new law, which will give fiscally-failed cities or school districts a choice of either entering a reform plan consent agreement with the state, entering mediation to create such a plan, being allowed to declare bankruptcy in federal court, or having an emergency manager appointed with powers similar to those that triggered the union-sponsored referendum (to invalidate unaffordable or unsustainable government union contracts). The replacement also adds a public information meeting requirement to the process; specifies procedures and conditions for exiting the financial emergency; explicitly gives a school EM authority over academic matters; and contains a modest appropriation that makes it "referendum-proof".
    Who Voted "Yes" and Who Voted "No"

  8. Motion in the Senate on December 13, 2012, to give the bill immediate effect. The motion passed 26 to 12 in the Senate on December 13, 2012.
    Who Voted "Yes" and Who Voted "No"

  9. Signed by Gov. Rick Snyder on December 26, 2012.

Comments

Re: 2011 Senate Bill 865 (Revise procedures for “rehabilitated” local governments )  by jg48386 on December 24, 2012 
Judy, so what's your plan to fix Detroit's finances?

Re: 2011 Senate Bill 865 (Revise procedures for “rehabilitated” local governments )  by Judy on December 18, 2012 
Senators Caswell,Young, Gleason and Smith, under their constitutional right of protest (Art. 4, Sec. 18), protested against the concurring in the House substitute of Senate Bill No. 865 and moved that the statements they made during the discussion of the bill be printed as their reasons for voting “no.”
The motion prevailed.
Senator Caswell’s statement is as follows:
I am following the dictates of my citizens back in my district who voted against this emergency manager bill.
Senator Young’s statement is as follows:
Let me see here, I think it was the good Senator from the 13th District who said, if I heard correctly, that the people could decide if they want help or not. Well, the people already decided, and they decided through a process called an election. Believe it or not, in that election, your side, Public Act 4, was defeated. Now I’m not a mathematician, but if you take a pie of 100 percent, I believe that 52 percent is higher. That’s how much of the vote we got: 52 percent, 52 to 48.
Last time I checked, the people already spoke. Last time I checked, they said they don’t want this law. So why do we need this law, then? If you’re trying to wait for locals to tell you what to do, the locals already told you what to do. They said pack it up. Get out of town. You don’t got to go home, but you’ve got to get out of here. That’s what the locals said, so, why don’t we listen to what the locals and people said?
Madam President, in my opinion, someone who would sacrifice liberty permanently for austerity, temporarily does not deserve to lead our democracy. This is an assault on democracy. This is an assault on the Constitution. It’s wrong. It’s illegal. It’s despicable. The people already decided. We derive all of our power from the people. Since the last time I checked, we were elected by them. Maybe you’re so used to following Rick “Dictator” Snyder, you forgot that it was the people who put us up here.
So let me remind you, they voted for this, and they voted it down. So let’s honor the wishes of the people by voting this down.
Senator Gleason’s statement is as follows:
I represent the city of Flint. Earlier this week, I think the institution suffered immeasurably for trying to literally prostitute the legislative process. I represent the city of Flint. I think if we’re going to undertake a measure such as this, there should be a work group of people who are impacted by this. You should take the concerned parties and sit down at a table and find a common resolution.
When I look at how we do our business in this Capitol, it’s discouraging. I want to remind you of one thing: this is not the first time I’ve been upset about this process. I want you to just listen to this and see how you were affected by this. Only a few months ago, the Governor told the citizens of Michigan—and probably more important, us—that he had a way to skirt the legislative process to build the bridge. I was offended by that because I think there is a purpose for the different branches of government and the rules that we all undertake.
Flint is in dire straits. There is some culpability from the current officeholders. All of us make mistakes and do things that we shouldn’t, but Flint is not unlike many urban centers across this country. When the manufacturing business gave out, they lost a very secure and longtime sustaining tax base. Who among us would’ve been able to survive that situation? It’s not unique that Flint is like most of the other communities. It’s an urban center that once was bustling with a manufacturing center that now is gone. Most of the things, we’re still paying for—whether it’s the public infrastructure or whether it’s the schools or whether it’s the universities that were established in these communities—are still old obligations. But the tax base has been so suppressed that they can’t take care of the day-to-day obligations. This should be no surprise to any of you. When we addressed this issue several months back, I said I wanted you to take full consideration. I said when we passed this bill, you ought to talk to the people who have to live with it.
We affect the credit rating of these communities. The schools and the cities, we affect their credit rating. I went through seven of them when I was on the County Board of Commissioners, and we had to take all of our local amenities to Standard & Poor’s & Moody’s. We had to take them, and we had to sell the bond rating companies on what our community had to offer. Every major investment was tied to that bond rating. We should’ve brought in financiers to ask how this is going to affect the bond ratings of our communities.
I don’t live in the city of Flint. I live outside in the city of Flushing, but all the communities on the hub of Flint will be affected by Flint’s credit rating. When you lose the substance of your core city and your county, everybody is held susceptible to that credit rating. We got people who worked in the banking industry; our Lieutenant Governor is one of them. We should’ve given this issue more consideration about that bond rating. We have the University of Michigan-Flint. We have Baker. We have Mott. We have these learning institutions that are going to be tied directly to the city’s bond rating when they go to make a case. We missed a very important step because once again, we tried to rush this through and not talk to the people who were affected by it.
We have to do better. I’m going to say it again: When the Governor said to everybody that he could run around the legislative branch and build that bridge, I thought that was a bad thing for our state. When you all ran around us on the right-to-work effort with no committee hearings, no input from the public; when you put money in the process in a state that’s broke; and now, once again, you do it without any consequences to those who have to live with your decision. This is a bad decision.
I don’t live in the city of Flint. I live outside in the city of Flushing, but all the communities on the hub of Flint will be affected by Flint’s credit rating. When you lose the substance of your core city and your county, everybody is held susceptible to that credit rating. We got people who worked in the banking industry; our Lieutenant Governor is one of them. We should’ve given this issue more consideration about that bond rating. We have the University of Michigan-Flint. We have Baker. We have Mott. We have these learning institutions that are going to be tied directly to the city’s bond rating when they go to make a case. We missed a very important step because once again, we tried to rush this through and not talk to the people who were affected by it.
We have to do better. I’m going to say it again: When the Governor said to everybody that he could run around the legislative branch and build that bridge, I thought that was a bad thing for our state. When you all ran around us on the right-to-work effort with no committee hearings, no input from the public; when you put money in the process in a state that’s broke; and now, once again, you do it without any consequences to those who have to live with your decision. This is a bad decision.
Senator Smith’s first statement is as follows:
I’m not going to stand up here and pontificate in front of my colleagues. Most of you guys know that I’m pretty reasonable when it comes down to it, but I’m just getting tired of this pernicious attack against our rights—especially in the city of Detroit. We’ve had a school district that’s been taken over by the state since 1999. I graduated from the Detroit public system in 1998. Our enrollment has consistently dropped since the state has been involved, and our funding has consistently decreased. It’s not better; it’s worse.
We put this consent agreement in play in the city of Detroit. They hired a CFO and a project manager, both of them making $200,000-some. They’ve done nothing. You guys act like this is some kind of panacea, that it’s going to actually get things in order. Well, I implore upon you, just follow the money. Just follow the money. All this is rearranging the chairs on the deck so somebody else can take this money and put it in their pocket. That’s what is basically going on here. Folks could care less about coming into the ghetto to get things right, at the end of the day.
So I’m just tired of this type of action that folks think that they need to take to get something right in areas that they really care nothing about because that’s all I see it as. If you really want to help, you come and ask folks who have reasonable minds, “Well, how can we help you?”—if you really wanted to help. That’s not what’s happening here. You just want to basically slap us down and pour something on us because you think you know better than us. That is flat-out despicable, and I don’t know what else to say.
Senator Smith’s second statement is as follows:
To the good Senator from the 21st District and the good Senator from the 13th District, I respect where you are coming from, but the problem is that they have not tried to work with us; they dictate to us. They come in and tell us what they want to do. Example: Robert Bobb came into the Detroit public school system—yes, I know Jennifer Granholm, former Governor Jennifer Granholm put him there—and was able to get a salary close to around $220,000 from the district. The philanthropic community gave him about $425,000. He gave contracts to folks from Cincinnati, D.C., and dictated to us. As he left, the district was in worse shape.
The problem is that you’re not trying to work with us; you’re dictating to us how things should operate. That’s why I said follow the money. Follow the money. In 1999, when the state came and took over our school district, we had a surplus of over $90 million. Since the state has been in play, we’ve run deficits, essentially, almost every single year. So, no, this is not something voluntary.
Folks are not asking for this; we are not asking for anybody’s help. I can handle my own pocketbook, thank you very much. This is control; takeover; give-me-what-you-got legislation, Madam President. I’m tired of this. If you want to work in unison, then come holler at me. I’m here and I’m ready to work with the most reasonable folks up here, but you don’t want to come talk to me. You want to dictate, and I’m tired of it.
Senators Pappageorge and Johnson asked and were granted unanimous consent to make statements and moved that the statements be printed in the Journal.
The motion prevailed.
Senator Pappageorge’s statement is as follows:
Perhaps I’m reading the wrong bill here. The way I read this bill it says local governments have a choice. They can ask for an emergency manager. They can choose to go into bankruptcy. They can choose mediation, and they can choose the consent agreement. Now, if the options are up to the locals, what is the problem here? Just because the emergency manager law was defeated does not mean the problem went away. It is still there, so we have an obligation to try and do something about that problem, and the choice is to let the locals decide how they want us to help them.
If you want an emergency manager, that’s fine; ask for it. If you want mediation, that’s fine; ask for it. If you want bankruptcy, that’s fine; ask for it. If you want a consent agreement, that’s fine; ask for it. So for those who say we’re shoving something at you, the only thing that we’re shoving at you is make a decision and we’ll help with whatever decision you come up with.
So perhaps I’ve been reading the wrong bill here because as I read it, the locals have to decide what they want to do and then let us know, and ask for the kind of help they decided they want from us. That’s not a bad thing to do, folks. It is local control, and I remind you again, the fact that a ballot proposal was defeated didn’t make the problem go away. It’s still there, and now we’re telling locals, “Tell us what kind of help you want from us.” I think that’s a reasonable way to proceed.
Senator Johnson’s statement is as follows:
It’s interesting as I sit here, I can’t help but notice and to almost be ashamed of the paternalistic tone of some of the members who are talking, particularly the speaker from the 13th District. I just want to ask a question for the record, for the legislative history, so that it reads right. Through you, Madam President, to the Senator, is it the intention of this majority that no city, no school district, will be forced by any means into this process, except by the affirmative vote of their local elected officials?
I’m asking that question, and I’m hoping that the reply will, in fact, be printed in the Journal. I do want to put on the record that one of the reasons that you see us stand here and be so vehemently opposed to these emergency managers and their positions is because we don’t have any evidence that any of this worked. It was so eloquently stated on the record just moments ago, I believe by the Senator who governs at least the city of Benton Harbor, that they’ve had a couple of emergency managers. Let me be very clear, I don’t care if it was Granholm or Snyder, they were both wrong. I marched right in her office, and I told her that her dog that was off the leash, known as Robert Bobb, was usurping his authority. He was acting in a very bullish manner, and the things that he was doing in the city of Detroit were both disingenuous and, in fact, illegal. We got rid of him.
Let me further place on the record that the person who has been brought in to be the chancellor of the not-so-legally‑standing or not-so-legislatively-build-out EAA left the Kansas City School District in shame, as they lost their accreditation. It was also widely reported that the No. 2 person brought in to lead the EAA who is now deceased, God rest her soul, left the city of Seattle School District mired in scandal as indictments and accusations flourished her activity at that school district.
Simply put, the law doesn’t work. We’ve seen city after city emerge and re-emerge into emergency management. A school district like Detroit—and we won’t talk about the surplus the city of Detroit School District had years ago. Let’s talk about the academic excellence that it had displayed across the nation. Those are the facts to be Googled, to be Wikipedia’d so that you understand that the city of Detroit’s school system was a long-sought-after pot of money that folks wanted to get their hands on so they could do to it precisely what they’re doing to it today. That was fourteen years ago.
GOP members in this chamber want me to believe that now because we have some myriad of things to choose from in the city of Detroit, related to how we’ll see ourselves governed under emergency management, is, in fact, going to make us a better system. You believe that? You all believe that? I don’t think you really do. I think that same paternalistic tone that’s been taken is the actual mindset of the GOP that says, “You people can’t govern yourselves. So no matter what the state says about the structure that doesn’t govern well at all, we’ll put in a law that does it for you.”
I guess we’ll just have to go back to the ballot.

Re: 2011 Senate Bill 865 (Revise procedures for “rehabilitated” local governments )  by jg48386 on December 17, 2012 
The "will of the people" is challenged repeatedly by all factions. Every time a school millage, public safety millage or property tax fails the local powers that be put it right back on the ballot. They usually shoot for a May election when "the people" don't go to the polls, only the the group in favor of the tax.

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