Wolverine Test

Michigan Treasurer Andy Dillon has indicated he will be disappointed if voters overturn the state’s emergency management law — the strongest in the nation. Nevertheless, he said if Wolverine voters reject the law next month, it would not spark a string of municipal bankruptcies or turn the Michigan local government landscape into one resembling California’s (see above). To date, the law has been used to solve the most pressing problems facing the state’s most stressed jurisdictions. Should the law be overturned, Mr. Dillon stated the state’s previous emergency management law, combined with a few new models, should be sufficient. Mr. Dillon (not to be confused with Marshall Dillon) spoke after he, Gov. Rick Snyder, and state budget director John Nixon met with all three major rating agencies in New York City in an ongoing effort to regain Michigan’s triple-A rating. This year’s meeting comes ahead of a roughly $100 million general obligation bond deal set tentatively for Nov. 8, two days after voters will weigh in on whether to repeal the EM law, known as Public Act 4, as well as five other major ballot initiatives with the potential to have a big impact on the state’s future. One measure would make collective-bargaining rights part of the constitution, and another would require a two-thirds legislative supermajority for any tax increases. There are currently seven Michigan jurisdictions under emergency management, with an EM expected to be named soon in an eighth, Allen Park. Mr. Dillon said the state is preparing to exit three stressed cities: Ecorse, Pontiac, and Benton Harbor. The emergency managers in those cities tapped PA 4 to implement a swath of changes that address core costs, like labor contracts. In Allen Park, he said an emergency manager lacking the powers of PA 4 would likely have a difficult time because one of the biggest problems is a police and firefighter contract that is “virtually impossible for the city.” In Detroit, Mayor Dave Bing relied on powers in PA 4 to order more than $100 million of wage and benefit cuts to current contracts over the summer. Detroit operates under a consent agreement with the state instead of an EM. The agreement has some ties to PA 4 but would not be overturned if the law is overturned. Top state officials would likely push for a new law that features the use of consent agreements and financial advisory boards for fiscally stressed communities if PA 4 falls, according to Dillon.