Nov 7 Tuesday's repeal by Michigan voters of a
controversial law that enhanced the state's power to intervene
in financially troubled local governments and school districts
could open the door to municipal bankruptcy, the governor said
"That is something that could be a greater likelihood of
happening if we don't have Public Act 4," Governor Rick Snyder
said in a conference call with reporters.
Nearly 53 percent of voters rejected the 2011 emergency
manager law, known as Public Act 4, according to unofficial
The law, which gave state-appointed emergency managers the
power to run troubled governments and suspend collective
bargaining agreements, had been suspended ahead of the vote. It
was replaced by a former weaker law known as Public Act 72; that
act's resurrection is being challenged in court.
If the challenge is successful, Michigan would be left
without a law to deal with fiscally struggling governments.
Currently, three school districts and five cities have emergency
managers, while three cities, including Detroit, are operating
under consent agreements.
Even if Public Act 72 does remain in place, Snyder said
emergency managers might not be able to act quickly and
effectively to deal with problems, increasing the potential for
Chapter 9 bankruptcy filings "because that could be the only
The Republican governor said he will be meeting with
legislative leaders to determine whether a new emergency manager
law could be crafted.
Greg Bowens, spokesman for a union-backed coalition that put
the repeal of Public Act 4 on the ballot, said the governor and
legislature need to respect the will of the people. The Stand Up
for Democracy coalition had objected to the law's ability to
usurp the power of local elected officials.
Snyder said a financial stability agreement that allowed
Detroit in April to skirt the appointment of an emergency
manager remains "solid" and should continue to be operational
even with the law's repeal.
Chris Mauro, head of municipals strategy at RBC Capital
Markets, said "a rebuff of the emergency manager law would have
negative credit consequences for some Michigan local
Credit rating agencies have warned that the law's
elimination could hurt already financially stressed local
governments, including Detroit, which saw its bond ratings
hammered lower into the junk category earlier this year.
Michigan voters on Tuesday also turned down a ballot measure
that would have required a two-thirds vote in each legislative
chamber or statewide voter approval for any new tax, tax
increase or for the expansion of the tax base.
Rating agencies had said the measure could limit the state's