State Laws Requiring Local Solvency

State laws that that trigger financial reviews and emergency managers are another manifestation of this power. Essentially, these triggers are based on one criteria: that each local government be able to pay its bills on time — in other words, that the government be solvent.

Indeed, Public Act 4 can be viewed as an enforcement mechanism for two other existing state laws: Section 21 of the Glenn Steil State Revenue Sharing Act of 1971[35] and Section 102 of the School Aid Act.[36] These sections require local governments and school districts to balance their budgets and operate their various funds without deficits. Should a deficit arise, a local government or school district is required to file a deficit elimination plan with the state treasury or the department of education, respectively.[37] The treasury or the department of education reviews and certifies the plan, and each department has the power to withhold some state support if the plan is not instituted.[38]

These two laws are meant to ensure proper fiscal management of local government entities. The state treasurer has 143 deficit elimination plans on file for the deficits in fiscal 2011, and only two of these units have had their revenue sharing withheld.[*], [39]

These figures indicate the extent to which this process has prevented most local units from triggering fiscal stress reviews under Public Act 4 or Public Act 72. In areas where local units do trip the triggers, the deficit elimination plans mandated by the state revenue-sharing and school aid acts have proven either inadequate or were not properly implemented.

For instance, the deficit elimination plan for the City of Allen Park called for a new property tax millage to fund its bond payments.[†], [40] The millage was later rejected by voters.[41] The state is expected to appoint an emergency financial manager in Allen Park.

[*] There are more than 2,000 local governments in Michigan. “Census of Michigan Governments,” (U.S. Census Bureau, 2007), 1,

[†] The city of Allen Park borrowed $40 million to purchase an automotive manufacturing facility in hopes a private movie studio would use the site. After the city borrowed the money and made some improvements to the property, the studio chose not to lease the facility, and the city was left with the bond payments and no leasors to help pay for them. See Anne Schieber, “The Problem with Allen Park,”(Michigan Capitol Confidential, 2012), (accessed Oct. 8, 2012).