The Unfettered Power of Michigan Emergency Managers Invites Corruption

Last updated on July 17th, 2023 at 06:04 pm

make it illegal

There are so many reasons to hate Rick Snyder’s financial martial law, be it in its previous carnation or in its current form.  Emergency financial managers, or as they are now known, emergency managers, are accountable to the governor and no one else. The people of a community have lost any sense of self- determination or freedom and elected officials are subservient to an un-elected apparatchik. Even if those things don’t matter, what business will enter a contract with a community when it’s very possible that the contract will be altered or cancelled unilaterally at a later date by an emergency manager?

Should we be surprised that someone whose political accountability is extremely limited would be caught with his hand in the financial cookie jar?

The short answer is no.  The story itself is long and complicated.  It all began when then Governor Jennifer Granholm appointed Art Blackwell to help then debt burdened Detroit regain financial stability. In other words, this story happened when the Emergency Financial Manager’s power was far less extensive than under either of Rick Snyder’s versions of the Emergency Financial Manager law.

Blackwell agreed to be Detroit’s Emergency Financial manager for one dollar a year. Subsequently, Blackwell decided to pay himself a total of $246,000 retroactively or $11,000 a month for two years.  He also failed to disclose that information in his quarterly reports to the community’s elected officials.

According to M Live’s reporting on the Court of Appeals Decision “the cash flow summary… did not list defendant as the recipient of any such funds.”

As former Councilwoman June Ridley put it, those steps really messed up Blackwell’s career.  Yes, that tends to happen when you take money you aren’t authorized to have then fail to disclose giving it to yourself in your reports to elected officials.

Generally, we have laws forbidding people from taking money that doesn’t belong to them (well, unless it’s Bain Capital, but that’s another story.)

Blackwell was charged with embezzlement and other charges.  In 2011, the Wayne County Circuit Court dismissed the charges by ruling there was insufficient evidence that Blackwell lacked authority to sign the checks.

In July 2012, Michigan’s Court of Appeals reversed that ruling,  thus reinstating the charges of embezzlement, embezzlement by a public officer, misconduct in public office, failure to safe keep pubic monies and refusal to deliver monies to successor in office.

This Court does not give the circuit court’s decision any deference. Id. at 313. A decision that falls outside the range of principled outcomes constitutes an abuse of discretion. People v Smith,

Simply put, the court decided  that the lower court’s ruling wasn’t one a reasonable court could reach.

Blackwell appealed his case to the State’s Supreme Court. On December 26, that court decided to uphold the Appellate Court’s ruling.

So here we are several years after the fact, with an example of just two of the problems that come with unaccountable financial managers.  First, we’re seeing the problem that comes with handing the keys of a community’s power to someone who is unaccountable to that community.  Second, we’re seeing the wheels of justice are painfully slow when it comes to deciding whether someone in Blackwell’s position should face charges – never mind weighing the evidence and concluding whether or not he violated the law.

Again, this happened under a version of the Emergency Financial Manager law in which the EFM’s powers were limited, and elected officials actually had some say about the community’s finances.  At the time, the Emergency Financial Manager did not have the unilateral power to alter or break contracts entered into with companies or contracts negotiated collectively on behalf of labor.  The Emergency Manager also had to account for expenses to elected officials of the community.

Snyder’s bills substantially expanded the EFM’s powers while reducing the power of citizens and their elected officials.  Snyder’s law effectively gave this person authority to unilaterally change contracts elected officials had with third parties.

As will be discussed below, the provisions of the Act permitting managers to reject, modify and terminate contracts and even their specific terms and conditions should give rise to concerns by third parties who are parties to contracts with local governments being operated by emergency managers in a receivership. The clear language of the statute could permit a manager to alter unilaterally the quantity and price terms of a contract to deliver goods and services to the local government or to reject and terminate the contract altogether. This is obviously not a result that contracting parties did not bargain for when they entered into prereceivership contracts with local governments.

This expansion of power to unaccountable, unelected officials raised legitimate concerns about the extent to which a contract with a business or with organized labor would be honored. It also meant that elected officials were increasingly powerless to an individual whose only constituent was Governor Rick Snyder.

Fifty-two days after Public Act 4 of 2011 (Snyder’s EFM bill number 1) was repealed by the voters of Michigan, the Snyder regime passed a more oppressive version of an already draconian piece of legislative work in the form of Public Act 436 of 2012.

Granted, the new law is advertised as giving communities in financial distress more options aside from an emergency financial dictator – or excuse me, manager. Under the new law, cities and school districts in financial distress may choose  mediation, a state-supervised financial consent agreement, an emergency manager or Chapter 9 municipal bankruptcy.

Unfortunately, these alternative options do not apply to communities that have an EFM under the previous law, which I guess means for those communities, an unelected official will continue to trump spending decisions made by legitimately elected officials.

Like the previous version, this bill allows EFMs to “reject, modify or terminate labor union agreements.” Moreover, collective bargaining can be suspended for five years.

It’s possible for cities and school district governing boards to remove an emergency manager.  However, the bar is high.  It can only occur after one year, and requires a voting super majority of two thirds.  Even if a community reaches that bar, it is stuck with the EFM’s spending plans, labor contracts and ordinances for two years after that Emergency Manager’s service  to Rick Snyder at the community’s expense.

Here’s the punch line.  Because the law contains a couple of appropriations, it’s immune from a ballot challenge. It provides the Treasury Department with $5 million so it can pay lawyers, financial consultants and others who dealing with municipal bankruptcies.  It also provides $780,000 to pay the emergency mangers’ salaries.

The absence of accountability means not only can emergency managers unilaterally break contracts with third parties that provide goods, services or labor; it increases the temptation to make decisions that may benefit corporate friends or political allies, at the expense of the community and its financial well-being.

An important part of freedom is electing people to manage the community’s finances in a manner that reflects the community’s wishes, and is in the communities’ best interests.  Another important part of freedom is electing  new officials who can undo bad decisions made by previous ones.  The latest version of financial martial law, Snyder style does neither.

On the plus side, Emergency managers no longer have worry about “messing up” their careers  by embezzling a community’s money. The State of Michigan will be paying their salaries and certain other related costs.

Wow, I feel so much better knowing that present and future emergency managers don’t have to worry about messing up their careers and can focus their attentions on messing up a community.

Image from GRID

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