Emergency Manager Law, Emergency Managers — January 21, 2012 at 1:01 pm

Indiana Republicans pass Emergency Manager bill out of committee


Collective Bargaining Contracts Vulnerable

I have been wondering how long it would take for a state other than Michigan to pursue an Emergency Manager law. The wait is over. This week, a Republican-sponsored bill allowing the imposition of an Emergency Manager on a “distressed political subdivision” (i.e., a municipality or school district) passed out of committee and goes on to the full state Senate.

A bill allowing the appointment of an emergency manager to right a cash-strapped local government’s finances passed a Senate committee on Tuesday.

The bill authored by State Sen. Ed Charbonneau, R-Valparaiso, sets up a five-member board that local governments, including school districts, can voluntarily petition for help. The emergency manager would step in if the board determines the local government is distressed and can’t meet its financial obligations.

A version of the bill died last session, but Charbonneau reintroduced the concept after removing the option of a distressed unit filing bankruptcy. Charbonneau told the Senate Committee on Tax and Fiscal Policy that bankruptcy provision “hijacked” last year’s bill. […]

The committee first voted to amend Senate Bill 355 to add school districts and expand its membership from three to five members before passing it to the full Senate 8-1. State Sen. Lonnie Randolph, D-East Chicago, voted against the bill over concerns with the emergency manager’s authorities. […]

The bill requires the distressed unit that requested the help to pay for the emergency manager and gives the manager broad authority to oversee the unit’s finances, including the ability to renegotiate labor contracts and reduce or suspend employees’ salaries.

Under the bill, Senate Bill 355, Emergency Managers have the power to, among other things, do the following:

  • Review existing labor contracts
  • Renegotiate existing labor contracts and act as an agent of the political subdivision in collective bargaining.
  • Reduce or suspend salaries of the political subdivision’s employees.
  • Enter into agreements with other political subdivisions for the provision of services.

The bill differs in a few significant ways from Michigan’s Public Act 4. First, the “political subdivision” must request a designation as “distressed” by filing a petition with the Distressed Unit Appeal Board. In Michigan, a “financial emergency” can be called by the state itself and does not require the municipality or school district to ask first.

Second, it does not allow the Emergency Manager to dismiss the entire elected government or even eliminate the municipality or school district as Michigan’s law does. However it does allow them to “assume and exercise the authority and responsibilities of both the executive and the fiscal body of the political subdivision concerning the adoption, amendment, and enforcement of ordinances and resolutions relating to or affecting the fiscal stability of the political subdivision.”

Finally, if passed into law, Indiana’s Emergency Mangers would report to the chairperson of the Distressed Unit Appeal Board rather than the State Treasurer as in Michigan.

That said, Michigan’s Emergency Manager law went through two previous incarnations before it ended up where it is today. If you are in Indiana, I highly suggest you follow this closely. It’s a very slippery slope that can lead to anti-democratic disenfranchisement of your poorest residents.