Barnett Says Emergency Financial Manager Bill Goes Too Far

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.