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Barnett Says Emergency Financial Manager Bill Goes Too Far

At Saturday's coffee hour, the 37th District state representative covered budget, taxes and other Lansing news.

On Feb. 17, Gov. Rick Snyder presented his budget plan and a tax plan that would replace the state's widely criticized business tax with a 6 percent tax only on a small group of large  corporations.

"I'm not enamoured with either (plan)," state Rep. Vicki Barnett (D-Farmington Hills) told a crowd of 50 constituents at her monthly coffee hour Saturday at in Farmington Hills.

Barnett said the governor's plan hurts schools, takes $200 million from local governments that provide vital services and "doesn't have a job creation program."

She is also concerned about a package of bills that would give emergency financial managers broad powers to manage local governments in financial trouble.

"I think the bills are absolutely horrible," Barnett said.

Under current law, emergency financial managers can be called in onlywhen a city, township or school district is in deep financial distress. The new legislation would create a "watch" period, during which officials would receive additional help to avoid being on the state's "watch" list, "which is why the Michigan Municipal League likes the plan," she explained.

But there is no requirement to determine how much help is needed once a financial manager is appointed, and the manager can be a person or a business, Barnett said.

Barnett said the is currently on the state's "watch" list, based on a score calculated by taking a number of factors into consideration. City Manager Vince Pastue said Saturday afternoon that he doesn't have any problem with the state establishing a score card for cities, but he said Farmington's score may not accurately reflect the city's financial position.

According to documents published on the state treasurer's website, areas of concern for the city include loss of population and taxable property value and general fund operating deficits in the current and previous year.

However, Pastue said, city officials intentionally drew down the fund balance in previous years in order to set aside money for paying back debt obligations.

"That's a negative, even though it's positive for us in the long term," he explained. In the city's last audit report, the auditor noted that "we've taken a lot of measures to address our long-term viability," Pastue said.

Barnett said that under the new law, the state treasurer would have sole discretion in appointing a financial manager, who would have the ability to immediately dismiss elected officials, ignore the city's charter, suspend all employee union and vendor contracts, sell off government assets and fire all employees. In addition, there is no cap on the manager's salary.

"That's why I have a problem with it," Barnett said. "This, to me, represents the largest private takeover of government entities in our nation. This stuff scares the daylights out of me."

But Farmington resident Kevin Giannini wondered whether there might not be a positive side to the bill.

"It seems to me that will be all the more incentives for cities to get their acts together," he said.

Giannini also wondered why there isn't a more concerted effort to merge Farmington and Farmington Hills, while retaining the character of both cities.

Barnett said that while the cities have talked about merging, Farmington officials and residents have wanted to keep certain amenities that require a separate millage. She is proposing the "central cities district" bill, brought forward in her last term, which would allow cities to merge, then to create separate taxing district boundaries within the merged area.

The emergency financial manager bills are still in play, Barnett said, and she urged residents to write to the governor, lieutenant governor and legislative leaders to express their opinions and concerns. Whether residents love or hate public employee unions, she said, most residents like their local charter, bid versus no-bid contracts and other aspects of local control.

"I'm trying to focus on those commonalities," she said.

Governor's budget proposal

Barnett said she'd like to see a much different approach to business taxes than what Snyder proposes. While the idea of a tax that only affects 5 percent of Michigan businesses may sound good, she said, it "would have Ford and GM paying income tax, but not Chrysler."

The proposed tax only applies to "C" corporations, which are publicly traded companies taxed separately from their shareholders. Chrysler is a limited liability corporation. In addition, it would create a $1.5 billion hole in the state budget. Barnett prefers a value-added tax, which is a flat-rate tax applied to all businesses.

She said the Snyder budget would shift the burden to a tax on pensions; would eliminate the Earned Income Tax Credit, which goes to low-income working families; and cut the School Aid Fund by $470 per pupil.

Barnett also pointed to an item on page 33 of the governor's budget document that addresses creation of a "Tax and Fee Reform Reserve Fund," which would require that a small percentage of all taxes collected be reserved every year. The fund would contain more than $1 billion in its third year, with no statutory indication of how the funds would be spent, she said.

"It's not a rainy day fund," Barnett said. "It can't even go into the general fund ... (the bill) doesn't tell us what it's for."

Barnett said the conversation that needs to happen in Lansing isn't happening right now. "We have a $1.8 billion deficit we have to fix. We have to look at it and have a discussion about what our needs are and how we're going to pay for them."

She praised Republicans who have allowed Democrats who oppose the emergency financial manager and other bills to raise their concerns and questions in committee. Barnett believes Michigan's legislators want to avoid the walkouts and protests that have gone on elsewhere.

"I think our representatives and senators don't want a Wisconsin on their hands," she said, adding that 10 Republican senators have reportedly refused to support Snyder's tax bill.

"However, we have to provide a viable alternative," she said, "one that everyone can live with ... one that I can defend and that makes sense."

Barnett's next coffee hour will be held April 9 at in Farmington Hills.

Correction: State Rep. Vicki Barnett's comment about Republicans who have reportedly refused to support the Governor's tax plan was misstated. Barnett said that 10 Republican senators have reportedly refused to Snyder's tax bill.

Ari Adler March 13, 2011 at 03:27 PM
With all due respect to Rep. Barnett, some of what she said about the emergency manager legislation is inaccurate. The legislation has been amended to address some early concerns. The state treasurer does NOT have sole discretion in appointing a financial manager and that person would NOT have the ability to immediately dismiss elected officials. In addition, Speaker Jase Bolger has NEVER said there are 10 Republicans who will not support the emergency manager legislation. On the recorded roll-call votes for this legislation, only one Republican in the House has voted "no." Ari B. Adler Press Secretary Speaker of the House Jase Bolger
Joni Hubred-Golden March 13, 2011 at 08:32 PM
To clarify, Mr. Adler, the "10 Republicans" comment was tied to the Governor's tax bill, not the emergency financial manager bill.
DCC March 13, 2011 at 10:06 PM
Adler declares "The state treasurer does NOT have sole discretion in appointing a financial manager" Check the bill: http://tinyurl.com/FeudalMichigan. Section 15 Chapter 4 Page 22 Line 9 says the governor appoints an EFM. Ch. 10 Pg 24 Ln 8 says the governor is allowed to delegate the selection and appointment tasks to the treasurer. Rep. Barnett's observations are entirely valid, as is this: the EFM "would have the ability to immediately dismiss elected officials, ignore the city's charter, suspend all employee union and vendor contracts, sell off government assets and fire all employees. In addition, there is no cap on the manager's salary." Oh, and to make matters worse, the EFM's compensation is determined by the treasurer who selects the people and negotiates the contracts. Of course the governmental unit, already strapped for funds, is on the hook to pay the contract. (Sec 15 Ch 5 Para (e) Pg 23 Ln 11). No possible conflicts there, eh? This is a bad bill for most of the people of Michigan.
DCC March 13, 2011 at 10:11 PM
But wait - there's more evil lurking: reading the bill (http://tinyurl.com/FeudalMichigan) at Section 15 Chapter 4 Page 22 Line 9 says the governor appoints an EFM. On the same page, Ch 6 gives allows the EFM to hire anyone he needs. There are no checks on who those "helpers" might be, but since they fall into the arena of "expenses", the same "financially strapped" governmental unit (oh, say Farmington) pays the freight. Citizens who value democracy and accountability need to heed Rep. Barnett's warning: this bill is bad news. As I summarize it, the bill makes the governor's administration judge, jury, and executioner of way too much. It is, well, feudal.
Vicki Barnett March 14, 2011 at 01:02 PM
To clarify, Mr. Adler is correct regarding the comment attributed to Speaker Bolger. I said that it has been reported that 10 republican state senators are opposed to Governor Snyder's tax plan.

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