Michigan Set To Enact Sweeping 'Financial Martial Law' Bill

Michigan Governor Rick Snyder now wants to impose "financial martial law" upon struggling communities in the form of "financial managers" that would have the power to abrogate contracts at will and supercede the democratic process.

As readers know, I was favorably inclined toward the overall positive tenor of the successful gubernatorial campaign run by Rick Snyder (R-Mich.) and his subsequent efforts to move past partisan political rivalries. I'd hoped that it portended some coming creative thinking and innovation in the realm of state management.

As it turns out, I was terrifically wrong, and Snyder's just lost me completely with his apparent desire to enact a law that would impose "financial martial law" upon struggling communities in the form of "financial managers" that would have the power to abrogate contracts at will and supersede the democratic process. There's been a lot of recent media attention focused on a similar disregard for the public will in Wisconsin, but what's happening in Michigan really makes Scott Walker look like an amateur.

According to the law, which has already been approved in the House, the governor will be able to declare "financial emergency" in towns or school districts and appoint someone to fire local elected officials, break contracts, seize and sell assets, and eliminate services.

Under the law whole cities or school districts could be eliminated without any public participation or oversight, and amendments designed to provide minimal safeguards and public involvement were voted down.

That's right! In case you were wondering, the law has been specifically engineered to obliterate any minimal form of public accountability:

An amendment to require Emergency Managers to hold monthly public meetings to let people know how they are governing was rejected by Senate Republicans, along with proposals to cap Emergency Manager compensation and require that those appointed to run school districts have some background in education.

A decade ago, folks like William Greider and Bill Moyers were doing critical, underreported work on the vagaries of international trade agreements which had similar anti-democratic ramifications. This Michigan power grab seems to be a homegrown varietal, of which the only precedent I can think of is the "Control Board" era of local governance here in Washington, D.C.

UPDATE: As has been pointed out to me, the legislative mechanics that Snyder is seeking to expand into what Republican state Senator Jack Brandenburg terms "financial martial law" were put in place by Democratic Governor Jim Blanchard -- the nonpartisan embrace of these policies further their likeness to the trade policies that people like Greider and Moyers reported on a decade ago.

Representative John Conyers (D-Mich.) says that the bill "raises serious constitutional concerns":

Article I, Section 10 of the U.S. Constitution explicitly prohibits any State from impairing a contract, which is exactly what this legislation does. As the Supreme Court has held in Home Building & Loan Association v. Blaisdell (1934), the sanctity of contracts cannot be impaired by a state law "which renders them invalid, or releases or extinguishes them ... Not only are existing laws read into contracts in order to fix obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order."

Further, the bill empowers this financial czar with the Governor's approval to force a municipality into bankruptcy, a power that will surely be used to extract further concessions from hardworking public sector workers. And, by making the risk of bankruptcy a reality, the bill will make it more not less expensive for municipalities to obtain financing given this risk, which will make the financial circumstances of municipalities even worse.

In his recent book, Griftopia, Matt Taibbi offers up a compelling example of Conyers' worst fears realized: the private takeover of Chicago's municipal parking meters. Presented to the Chicago City Council with the aim of forcing them into a hasty decision, with the urgency of the financial crisis as a whip, Chicago ceded control of their parking meters to a private concern put together by Morgan Stanley's infrastructure fund that eventually ended up in the hands of foreign investors.

As someone like Carl Levin might point out, the people of Chicago were stuck with a "shitty deal":

To start with something simple, it changed some basic traditions of local Chicago politics. Aldermen who used to have the power to close streets for fairs and festivals or change meter schedules now cannot -- or if they do, they have to compensate Chicago Parking Meters LLC for its loss of revenue.

So, for example, when the new ownership told Alderman Scott Waguespack that it wanted to change the meter schedule from 9 a.m. to 6 p.m. Monday through Saturday to 8 a.m. to 9 p.m. seven days a week, the alderman balked and said he'd rather keep the old schedule, at least for 270 of his meters. Chicago Parking Meters then informed him that if he wanted to do that, he would have to pay the company $608,000 over three years.

The bigger problem was that Chicago sold out way too cheap. Daley and Co. got roughly $1.2 billion for seventy-five years' worth of revenue from 36,000 parking meters. But by hook or crook various aldermen began to find out that Daley had vastly undervalued the meter revenue.

When Waguespack did the math on that $608,000 he was going to be charged, he discovered that the company valued the meters at about 39¢ an hour, which for 36,000 meters works out to $66 million a year, or about $5 billion over the life of the contract.

"When it comes to finding a figure for the citizens of Chicago, they say the meters are worth $1.16 billion," Waguespack said shortly after the deal. "But when it comes to finding a figure to cover Morgan Stanley, they say they're worth, what, $5 billion? Who are they looking out for, the residents or Morgan Stanley?"


But the most obnoxious part of the deal is that the city is now forced to cede control of their streets to a virtually unaccountable private and at least partially foreign-owned company. Written into the original deal were drastic price increases. In Hairston's and Colon's neighborhoods, meter rates went from 25¢ an hour to $1.00 an hour the first year, and to $1.20 an hour the year after that. And again, the city has no power to close streets, remove or move meters, or really do anything without asking the permission of Chicago Parking Meters LLC.

Welcome to your future, people of Michigan (where the working class is already carrying the state's fiscal problems on their backs alone)! And while I'm sure the proponents of the bill will insist up and down that these extreme measures are meant to be temporary ones, God help you if you find yourself wanting to retrieve control of public sector assets from the folks that "bailed them out." While public contracts seem to be eminently violable, what typically happens when you act to undercut private sector profits is that you get the bejeezus sued out of you.

Beyond that, the removal of legally elected public officials in favor of unaccountable czar-types is probably the most radical part of the proposed measure. And, hey, speaking of "czars," here's Jim Newell with what would normally be, in some circles, a fairly obvious observation:

You hear Tea Party folks and Republicans in Congress complain about the White House's collection of "czars" -- appointees with actual departmental jobs who coordinate policy in certain sectors. Supposedly the czar system is an undemocratic way of rewarding cronies and bypassing congressional checks on power. But if that's a problem, and maybe it is, then new Republican Michigan Gov. Rick Snyder's bill for appointing "emergency financial managers" to reorganize the state's failing localities should be met with about 100 times more revulsion.

I'd wager that you won't hear a peep out of the "down with czars" set on this matter.

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