Summary of the Local Government and
School District Fiscal Accountability Act Process
Step One:
If one or more conditions indicative of probable
financial stress in a local government exist, the State Financial Authority
(State Treasurer or Superintendent of Public Instruction) may conduct a
preliminary review, after providing the unit of local government with
specific written notification of the review.
Step Two:
The State Financial Authority must inform the
Governor within 30 days of commencement of the preliminary review whether or
not probable financial stress exists.
Step Three:
The Governor must appoint a review team if the
State Financial Authority informs the Governor that a preliminary review has
been conducted and a finding of probable financial stress was made.
A review team consists of the State Treasurer (or his or her designee),
the Director of the Department of Technology, Management, and Budget (or his
or her designee), a nominee of the Senate Majority Leader, a nominee of the
Speaker of the House of Representatives, and any other State officials, or
other persons with relevant professional experience selected by the
Governor. The Superintendent of Public Instruction (or his or her designee)
also is a member if a school district is involved.
Step Four:
Unless the Governor specifies an earlier date,
or grants a 30-day extension, a review team must report to the Governor
within 60 days of its appointment and indicate whether specific statutory
conditions exist or are likely to occur which constitute no or mild
financial stress, severe financial stress, or financial emergency:
(a) No or mild financial stress exists in the unit of local government if
any of the following occur:
-- The review team reports that none of the specified statutory
conditions exist or are likely to occur.
-- The conditions may occur, but will not threaten the capability of
the unit of local government to provide necessary governmental services.
(b) Severe financial stress exists in the unit of local government if any
of the following occur:
-- The review team reports that one or more of the specified statutory
conditions exist or are likely to occur.
-- The chief administrative officer of the unit of local government
recommends that the unit of local government be considered in severe
financial stress.
(c) A financial emergency exists in the unit of local government if:
-- The review team reports that two or more of the specified statutory
conditions exist or are likely to occur within the current fiscal year
that threaten the future capability of the unit of local government to
provide necessary governmental services.
-- The unit of local government failed to provide timely and accurate
in-formation to the review team.
-- The unit of local government failed to comply with one or more
financial plans.
-- The unit of local government materially breached the terms of a
consent agreement.
-- The unit of local government is in a condition of severe financial
stress and a consent agreement was not adopted.
-- The chief administrative officer of the unit of local government
recommends a financial emergency be declared and the State Treasurer
concurs.
Step Five:
Within 10 days after receipt of the review team
report, the Governor must make one of the following determinations:
(a) The unit of local government is not in a condition of severe
financial stress.
(b) The unit of local government is in a condition of severe financial
stress, but a consent agreement containing a plan to resolve the severe
financial stress has been adopted.
(c) A local government financial emergency exists and no satisfactory
plan exists to resolve the emergency.
(d) The unit of local government entered into a consent agreement
containing a continuing operations plan or recovery plan to resolve a
financial problem, but materially breached the consent agreement.
Step Six:
If the Governor determines that a financial
emergency exists, he or she must provide written notification to the chief
administrative officer of the unit of lo-cal government who may request,
within seven days after receiving notice, a hearing conducted by the State
Financial Authority or his or her designee.
Step Seven:
After the hearing or, if no hearing was
requested, after expiration of the opportunity for a hearing, the Governor
must either confirm or revoke the determination of a financial emergency.
Step Eight:
A local government, with a two-thirds vote of
its governing body, may appeal the Governor's determination to Ingham County
circuit court. The determination may be set aside only if found to be
either:
(a) Not supported by competent, material, and substantial evidence on the
whole record.
(b) Arbitrary, capricious, or clearly an abuse or unwarranted exercise of
discretion.
Step Nine:
If the Governor confirms the determination of a
financial emergency, the Governor is required to declare the unit of local
government in receivership and appoint an Emergency Manager who serves at
the pleasure of the Governor.
Step Ten:
Upon being placed in receivership, the governing
body and chief administrative officer of the unit of local government are
prohibited from exercising any of their powers of offices without written
approval of the Emergency Manager, and their compensation and benefits are
eliminated.
Step Eleven:
Within 45 days of appointment, an Emergency
Manager must develop a written financial and operating plan.
In addition to other powers, an Emergency Manager may reject, modify, or
terminate collective bargaining agreements, recommend consolidation or
dissolution of units of local government, and recommend bankruptcy
proceedings.
Step Twelve:
A unit of local government is removed from
receivership when the financial conditions which were the basis for the
underlying financial emergency are corrected in a sustainable fashion as
determined by the State Treasurer in accordance with the Act.
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