With their lawsuit, filed against Gov. Rick Snyder and state Treasurer Andy Dillon, Sugar Law Center Legal Director John Philo said these plaintiffs are questioning the constitutionality of the legislation.

“This law needs to be amended or repealed,” he said. “The courts are going to have to decide whether the statute is constitutional or if they‘re going to tell the citizens of the state, ‘You don’t have a right to an elected local government.’”

Since it’s adoption in March, this law, which allows the governor and treasurer to appoint emergency financial managers to take over struggling local governments and school districts, has garnered much statewide and national attention and opposition.

Because this emergency official has the authority to ignore labor contracts, undo local ordinances and dissolve elected boards, assistant professor of political science Sarah Reckhow said citizens feel their rights have been violated.

“It cuts right to the heart of something people hold dear, which is local democracy,” she said. “It’s a pretty strong restriction on an elected body to basically remove its powers and put somebody in charge who’s not elected.”

But Terry Stanton, spokesman for the Michigan Department of Treasury, said managers are brought in only to protect the safety, health and welfare of citizens.

“Not only does (Treasurer Dillon) believe it is constitutional, the statutory changes were critical in the state’s continuing efforts to help communities and school districts avoid financial emergencies,” he said.

The fact that this law allows emergency financial managers such broad power is what the plaintiffs take issue with, Philo said.

“In many ways, it’s a power grab over local government,” he said. “(These managers) have power over every aspect of the city — they can decide who sits on what board (and) enact new ordinances.”

But Reckhow said limiting an emergency manager’s authority can be difficult because of the many areas affected by an institution’s finances.

“That’s the tough thing about this,” she said. “What doesn’t relate to finances?”
So far, emergency financial managers have been brought in to transform Benton Harbor, Mich., and Detroit Public Schools. But Philo said the plaintiffs as well as other Michigan residents are concerned because they recognize that, though their community might be healthy today, it could be the one that’s under stress tomorrow.

“It may be in Benton Harbor right now, but next year that could be their community,” he said. “The law applies throughout the state.”

A group known as Michigan Forward also is working to collect signatures to repeal the law, and the city of Detroit’s two pensions boards have filed their own lawsuit in a federal court against the legislation.

Whether people like it or not, state governments generally have a lot of power over local governments, Reckhow said.

“States sometimes change the way local governments are organized,” she said. “They have that power because local governments are creatures of the state.”

Reckhow said with this law, government officials are attempting to use their power to avoid a situation that likely would be even more severe for local governments and schools: declaring bankruptcy. These institutions can avoid the time and the courts involved in the process of filing for bankruptcy by instead having someone who specifically is responsible for seeing a community through to stabilization.

Although this safety net is in place, Stanton said officials hope appointing an emergency manager never again is necessary.

“The overarching goal (of the law) is never to have to appoint an emergency financial manager again,” he said. “The state could work with the local government before they get to the point of the emergency.”