Signed by Governor Rick Snyder

Vote Smart's Synopsis:

Vote to concur with House amendments and pass a bill that requires a local educational government to choose from 4 options to solve a financial emergency.

Highlights:

• Requires the governing body of the local government to choose one of the following options within 7 days after the governor declares a financial emergency (Sec. 7):
•     Consent agreement;
•     Emergency manager;
•     Neutral evaluation process; or
•     Chapter 9 bankruptcy.

• Defines “financial emergency” as the local government remaining in any of the following situations (Sec. 5):
• The local government defaults in the payment of principal or interest upon bonded obligations;
• The local government fails to pay wages or other compensation for employees for 7 or more days after the scheduled date of payment;
• The local government has accounts payable in excess of 10% of total expenditures; or
• Any other facts and circumstances indicative of local government financial emergency.

• Authorizes the local government to appeal the declaration of financial emergency with a 2/3 vote of the governing body within 10 days of the declaration (Sec. 6).

• Authorizes the emergency manager to reject, modify or terminate 1 or more conditions of existing union contracts (Secs. 12 & 15).

• Authorizes the local government to approve or disapprove the emergency manager’s proposals, and to provide alternate proposals that have the same financial impact (Sec. 19).

• Authorizes the local government to remove an emergency manager by 2/3 vote of the governing body if the emergency manager has served for at least 18 months (Sec. 9).

• Requires the Department of Treasury to pay for the salaries of emergency managers, whereas current law requires the local government to pay the salary of the emergency manager (Sec. 34).

• Defines the "consent agreement option" with the following requirements, including but not limited to (Sec. 8):
• The consent agreement must outline measures to provide for financial stability;
• The consent agreement requires periodic financial status reports to the state treasurer; and
• The consent agreement must include a detailed projected budget over at least 3 fiscal years which demonstrates that deficits will be eliminated during the projected budget period.

• Defines “Neutral Evaluation Process” as a form of meditation between the local government and interested parties with the following requirements, including but not limited to (Secs. 2 & 25):
• The local government and interested parties must agree on a neutral evaluator;
• The parties have 60 days to reach a settlement agreement that provides sufficient savings to the local government; and
• “Interested parties” may include trustees, creditors, bondholders, or labor unions.

• Authorizes the local government to file for Chapter 9 Bankruptcy after a majority vote of the governing body and approval of the governor (Sec. 26).

Full Bill Text

Vote Smart's Synopsis:

Vote to pass a bill that requires a local educational government to choose from 4 options to solve a financial emergency.

Highlights:

• Requires the governing body of the local government to choose one of the following options within 7 days after the governor declares a financial emergency (Sec. 7):
•     Consent agreement;
•     Emergency manager;
•     Neutral evaluation process; or
•     Chapter 9 bankruptcy.

• Defines “financial emergency” as the local government remaining in any of the following situations (Sec. 5):
• The local government defaults in the payment of principal or interest upon bonded obligations;
• The local government fails to pay wages or other compensation for employees for 7 or more days after the scheduled date of payment;
• The local government has accounts payable in excess of 10% of total expenditures; or
• Any other facts and circumstances indicative of local government financial emergency.

• Authorizes the local government to appeal the declaration of financial emergency with a 2/3 vote of the governing body within 10 days of the declaration (Sec. 6).

• Authorizes the emergency manager to reject, modify or terminate 1 or more conditions of existing union contracts (Secs. 12 & 15).

• Authorizes the local government to approve or disapprove the emergency manager’s proposals, and to provide alternate proposals that have the same financial impact (Sec. 19).

• Authorizes the local government to remove an emergency manager by 2/3 vote of the governing body if the emergency manager has served for at least 18 months (Sec. 9).

• Requires the Department of Treasury to pay for the salaries of emergency managers, whereas current law requires the local government to pay the salary of the emergency manager (Sec. 34).

• Defines the "consent agreement option" with the following requirements, including but not limited to (Sec. 8):
• The consent agreement must outline measures to provide for financial stability;
• The consent agreement requires periodic financial status reports to the state treasurer; and
• The consent agreement must include a detailed projected budget over at least 3 fiscal years which demonstrates that deficits will be eliminated during the projected budget period.

• Defines “Neutral Evaluation Process” as a form of meditation between the local government and interested parties with the following requirements, including but not limited to (Secs. 2 & 25):
• The local government and interested parties must agree on a neutral evaluator;
• The parties have 60 days to reach a settlement agreement that provides sufficient savings to the local government; and
• “Interested parties” may include trustees, creditors, bondholders, or labor unions.

• Authorizes the local government to file for Chapter 9 Bankruptcy after a majority vote of the governing body and approval of the governor (Sec. 26).

Full Bill Text