Michigan voters in November will decide the fate of a law that gave the state more control over struggling local governments after a court on Friday gave them the chance to repeal it.
Michigan officials said that once the measure is officially certified for the November 6 state-wide ballot as directed by the state supreme court, the 2011 law known as Public Act 4 will be suspended and a former, weaker, emergency manager law will replace it in the interim.
Parts of an April financial stability agreement between Detroit and the state depend on Public Act 4, which boosted Michigan's ability to intervene in financially troubled local governments. The law gave state-appointed managers enhanced powers to run those governments, including the ability to suspend collective bargaining agreements. Four Michigan cities and three school districts have emergency managers, while two other cities besides Detroit have consent agreements.
Governor Rick Snyder said the law's suspension will limit the state's ability to give early aid to troubled governments and will eliminate key tools for emergency managers to fix problems.
"It promises to make eventual solutions to those emergencies more painful," the Republican governor said in a statement.
"While I fully support the right of all citizens to express their views, suspension of the Local Government and School District Fiscal Accountability Act may adversely affect Michigan communities and school districts mired in financial emergencies," Snyder added.
Detroit Mayor Dave Bing said the city's agreement, which created an oversight board, remains in effect, along with a 10 percent wage cut and other benefit and work rule changes imposed on unionized workers last month as a way to save $102 million for the cash-strapped city.
Michigan Treasurer Andy Dillon told reporters in a conference call that "the vast majority" of Detroit's financial stability agreement will remain intact".
Dillon said that plans are proceeding to sell long-term bonds by the end of August to raise $137 million to repay an $80 million interim borrowing for Detroit and improve the city's cash flow. He also said that actions taken by emergency managers while Public Act 4 was in effect will survive.
Emergency managers in most other cities and school districts, however, will have to be reappointed as emergency financial managers, who will have lesser powers, according to state officials.
Dillon said it was also possible the Michigan Legislature could act this month on a new emergency manager law that could be crafted with input from public worker unions.
Greg Bowens, a spokesman for the union-backed Stand Up for Democracy coalition that spearheaded the petition drive for the law's repeal, said replacing Public Act 4 with a an old, repealed law or passing a new law would "subvert the will of the people".
The coalition had collected enough valid signatures on petitions for ballot certification, but questions over whether the proper type size was used on the petitions led the matter to the Michigan Supreme Court, which heard arguments last week.
Meanwhile, Dillon conceded that the law's suspension will be viewed negatively by credit rating agencies.
Fitch Ratings on Friday warned of uncertainties for Michigan governments should the repeal measure make the ballot and raised concerns that Detroit's fiscal pact could be weakened or nullified if Public Act 4 were repealed.
(Reporting by Karen Pierog; Editing by James Dalgleish, M.D. Golan and Andrew Hay)