Understanding Michigan House Bill 4214 also known as the Local Government and School District Fiscal Accountability Act

People are protesting against Michigan Governor Rick Snyder because they are misinformed about House Bill 4214, also known as the Local Government and School District Fiscal Accountability Act. They did not read the bill or understand it–they only picked up on the buzz words and the conspiracy theory projected on the news networks and in the blogosphere. There is a logical, practical, and pragmatic reason for the bill that is very straightforward and understandable, if you take the time to read it.

This is what I learned:  There is the possibility that Michigan municipalities will fail in the near future, much like many individuals are going bankrupt. To prevent this from happening, the governor has instituted a plan of action for what to do in this situation. There are 2 levels of financial problems where the state will act (1) stress and (2) emergency.

(1) Stress to local government and schools happens when any of a dozen things occur including delinquency to creditors, failure to make deposits to pension funds, failure to pay wages, failure to file an annual financial support, and bond default. These are red flags that need to be addresses immediately with the help of a state appointed indvidual or company.

If left unaddressed, these stess situations could threaten the future capability to provide necessary government services essential to public health, safety, and welfare. The team is either requested by the stressed entity for aid, or is analyzed by the state treasurer as being in need of support. The team then works with the local unit of government to resolve the problem quickly.

Continued stress leads to a state of (2) emergency that must be handled quickly and efficiently to prevent a downward spiral towards bankruptcy. Enumerated are 6 specific conditions that constitute an emergency. To rectify debt, the state appointed people may reject, modify, or terminate specific terms of an existing contract after conferring with the bargaining representatve. Prompt resolutions that are reasonable and necessary must be obtained to deal with an economic problem. If an agreement is not settled quickly through the bargaining rep, the state will make all the changes it deems reasonable and necessary to achieve recovery of financial emergency for a local school or municipality.

Some steps that may be taken include elimination of specific terms of a contract, reorganization of school districts, and prosecution of officials accused of criminal conduct.

It is a proactive plan for the inevitable insolvency of a local government somewhere in Michigan.

Unfortunately, a lot of public officials have little, if any, financial background–they get elected because they are popular, especially in small towns or in Detroit. That’s fine until a crisis arises and it becomes evident that they are in over their head when dealing with finances. That’s when the governor will send in someone, or some company, to prevent a crisis that could be averted. The bill says nothing about the appointments being permanent. They are only there to help. This bill provides experience, assistance, and relief in a small window of time and is a much needed plan of action for any responsible organization.

Congratulations to Governor Rick Snyder for addressing this issue before it becomes a problem.