It’s only his second year in elected office, but businessman turned Michigan governor, Rick Snyder, is already making big waves in the financially troubled Great Lakes State and its ailing metropolis, Detroit.
Whether those waves are good or not depends on whom you ask.
Hundreds of protesters gathered on Monday at Gov. Snyder’s private home near Ann Arbor, decrying the state’s use of emergency financial managers. These managers have taken over Michigan cities and public institutions that are facing financial crisis—including the cities of Flint, Benton Harbor, and Pontiac—as well as Detroit Public Schools and Highland Park Schools.
“We don’t want our elected officials to be unilaterally dismissed,” said Detroit-based the Rev. Charles E. Williams II at the protest, according to Annarbor.com. “And that’s the message that we’re sending here today.”
In response to criticism over emergency financial managers, Gov. Snyder told MLive.com last month: “It’s not a normal situation. It’s not business as usual, or government as usual. There’s an emergency. Something needs to be done because there truly has been a failure from a financial point of view. So the question is, how do you do that as effectively and quickly and get out?”
Michigan is often ranked among the worst economies in the country, and the state has set up conditions for implementing emergency financial managers.
When a local government shows signs of certain financial stress, Michigan’s State Financial Authority begins a review process. If it deems certain conditions of financial stress have been met, the governor then assigns his own review team, consisting of the state treasurer and other state officials, to determine the extent of the crisis.
If the team determines the problem a financial emergency, the governor “is required to declare the unit of local government in receivership and appoint an emergency manager,” according to Michigan.gov
Not unprecedented among the powers wielded by U.S. states, Michigan’s emergency financial managers have the ability to throw out union contracts, dismiss elected officials, and privatize public services.
The city of Detroit itself is undergoing formal review right now, which could lead to an emergency financial manager being introduced. Detroit Mayor Dave Bing announced in November that the Motor City is facing a large budget shortfall and debt problems.
Despite the criticisms, Gov. Snyder said that bankruptcy would be worse. “One thing I would put in perspective is the emergency manager doesn’t have the powers that exist under bankruptcy. Bankruptcy powers would go beyond what an emergency manager would have. So it’s not the most extreme answer by any means,” he said.
Most recent takeover
The most recent emergency manager takeover happened last week, when Gov. Snyder declared a financial emergency in the school district of Highland Park, a small city that is almost entirely surrounded by Detroit.
The determination—which may presage a takeover of Detroit—came following the report of a 10-member, independent financial review team.
“Through the comprehensive reviews that have been conducted, it is clear the district faces monumental financial challenges,” Gov. Snyder said in a release.
The review team found that the school district’s cumulative deficit increased by 51 percent over the past fiscal year, growing from $6.6 million to $11.3 million. Also, while the deficit of the school district climbed, student enrollment has decreased by 58 percent since 2006.
“It is critical that students in the Highland Park School District get the education they need and deserve. For that to continue, the Highland Park School District must have stable finances,” said Gov. Snyder.
The Highland Park school board is challenging the takeover in an upcoming hearing.
Real results
Like them or hate them, the emergency financial managers are getting real results. Through spending cuts, debt refinancing, and federal revenue, Detroit Public Schools were able to achieve a $43 million budget surplus last year, for the first time in four years, avoiding a $327 million budget deficit, according to The Associated Press.
“We are moving solidly in the right direction,” emergency manager Roy Roberts said, according to AP.
Michigan’s economy overall is also recovering.
“The Michigan economy is two years into a recovery. … Job growth up until now has outpaced the nation,” according to top quantitative economist George A. Fulton at the University of Michigan in a November report. “This year has been one of solid growth, by our estimate a gain of 62,600 jobs, and we do see the recovery continuing at least through 2013.”
Gov. Snyder lauded the economic improvements on Wednesday night in his annual State of the State address.
“We made large strides to make Michigan great again,” said Snyder. “We’re getting it right and getting it done.”
But, he also tempered his statements with admissions that Michigan has a long way to go in terms of its unemployment rate and crime. The Michigan cities of Saginaw, Flint, Detroit, and Pontiac are ranked among the worst for violent crimes, he said.
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