Saturday, March 19, 2011

Emergency Finance Bills Substitute Dictators for Democracy in Troubled Local Governments

As the lost revenue from the recession hits state treasuries there is a rush by several states for new legislation that makes major changes in who will actually control financially troubled local governments. It is not the citizens but an Emergency Financial Manager (EFM) that is being given unheard of power. The EFM is appointed by the Governor.


The new rules give the EFM the power to overturn negotiated contracts between unions and local units, remove elected officials from office, sell community assets, eliminate the salary and benefits of elected officials and request local millage votes to increase revenue. An EFM could dissolve a school district or local unit of government and merge it with neighboring ones. The EFM can also sell community assets.

More detailed comments on the EFM from the Detroit Free Press can be found here. The system is currently said to be applied only to communities which have repeatedly failed to solve their finance problems. It seems made to be abused. Revenue sharing is being cut drastically in many states and many communities will have problems.

Detroit has run a deficit since 2003 and is a prime target. Can substituting a dictator for a democratic process improve the situation? We will see. The economic cards for Detroit are so dire that it is doubtful. Taking the right to solve their problems through democratic procedures away from the population is a dangerous step which requires very close watching.

A nightmare scenario: Hey, Mr. Mayor, don’t worry; Even though we have drastically cut the state revenue sharing the Governor will assign an EFM to tell you what to do. Well, it’s not really a person; it’s a corporation from New York. They specialize in putting together packages of local government debt into securities that they sell on the market. Everyone is doing it.

Be very careful with the power you give an Emergency Financial Manager

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