The Fiscal Imbalances & Human & Fiscal Consequences of Fiscal Distress

06/16/17

Good Morning! In this a.m.’s eBlog, we consider the lessons learned from Flint—lessons not unrelated to the largest municipal bankruptcy in U.S. history in Detroit.

Michigan Attorney General Bill Scheutte, stating “People have died because of the decisions people made, has charged five Michigan state employees with involuntary manslaughter over their actions and involvement with Flint’s lead-contaminated water, including Nick Lyon, the Director of the Michigan Department of Health and Human Services, former Flint Emergency Manager Darnell Earley, former Michigan Department of Environmental Quality Drinking Water Chief Liane Shekter-Smith, state Water Supervisor Stephen Busch, and former Flint Water Department Manager Howard Croft. The quintet is accused of failing to alert the public about an outbreak of Legionnaires’ disease in the Flint area related to its contaminated drinking water—contamination which was suspected in the 12 deaths, Legionnaires’ disease sickening 79 others, and near insolvency of the City of Flint. Mr. Scheutte has not ruled out potential charges against Michigan Governor Rick Snyder, and he announced a new list of charges in a sweeping investigation that has already led to cases against 13 officials

Mayor Karen Weaver, in the wake of the press conference, noted: “It’s terrible what has occurred, but it’s a good day for the people of the city of Flint…We’ve had people die as a result of this water crisis. And for justice to be had is wonderful.”

Attorney General Bill Schuette, at the press conference, stated that the state’s health Director had failed to protect the residents of Flint, resulting in the death of at least one person, 85-year-old Robert Skidmore of Genesee Township. He also charged Michigan’s Chief medical officer, Dr. Eden Wells, with obstruction of justice and lying to a police officer, noting: “People have died because of the decisions people made…There are two types of people in the world: Those who give a damn and those who don’t. This is a case where there has been willful disregard.”

Mr. Scheutte’s charges mark the first time investigators have drawn a direct link between the acts of state government officials in Flint’s water contamination crisis and the deaths of residents which followed. Since 2014, when this city switched water suppliers, partly to save money, the water has been linked to the lead poisoning of children and the deaths of 12 people and 79 other residents of the city sickened by Legionnaires’ disease in 2014-15, which experts have linked to the contaminated water after the city, on the directions of the Governor’s then appointed Emergency Manager, Darnell Earley, switched to Flint River water in April of 2014.

At the press conference, Attorney General Schuette indicated he has not ruled out possible charges against the Governor. His actions came in the wake of his earlier charges of obstruction of justice against Michigan’s chief medical officer, Dr. Eden Wells, charged with obstruction of justice and lying to a police officer, noting: “People have died because of the decisions people made,” so that his actions were critical to the restoration of trust and accountability. “There are two types of people in the world: Those who give a damn and those who don’t. This is a case where there has been willful disregard” for the health and safety of others, Flood said.

The charges against Mr. Earley, the gubernatorially appointed former emergency manager on whose watch the city switched to Flint River water, include false pretenses, conspiracy to commit false pretenses, misconduct in office and willful neglect of duty while in office—charges which a carry a sentence of up to 20 years in prison. Attorney General Schuette noted: “The health crisis in Flint has created a trust crisis in Michigan government.”

Governor Snyder issued a statement of support for Mr. Lyons and Dr. Wells; he appeared critical of the legal process, noting that other state employees had been charged more than a year ago, but had yet to have their cases tried in court: “That is not justice for Flint, nor for those who have been charged.”

The state actions do not address the fundamental underlying fiscal issue of equity—or what Grand Rapids Mayor Rosalynn Bliss notes is the state’s broken state system of funding municipalities, or, as she told her colleagues at the Mackinac Policy Conference the week before last, she had been forced to adopt more local taxes and cut staff in order to make up for consistent cuts in state revenue sharing. Noting a lack of any fiscal bridge to address fiscal disparities, she told her colleagues that even as her city’s population has continued to grow towards the 200,000 mark, it has been forced to cut its staff by 25% since 2005: she reported the city has 100 fewer police officers now than there were 15 years ago—meaning that during Grand Rapids’ budget discussions this year, the city’s voters and taxpayers, to bridge gaps in state funding, agreed to taxes for public safety, streets, and parks. She described this “shift to the local units, because people care about their local services and what’s available to them, because we know that’s what makes cities great. That’s what attracts families to want to live in cities and businesses to move to cities: people want to live in safe neighborhoods. They want to drive on streets where the tires don’t pop from potholes. They want to be able to walk to a park that’s safe where their kids can play on a playground. Where the swimming pool is actually open. Those are decisions we grapple with at the local level every single day. And the decisions being made in Lansing impact every single city, including Grand Rapids…People move to Michigan for the quality of life – but funding issues can impact what services cities are able to provide to residents that they value…Long-term, relying on local taxes to keep up quality of life initiatives isn’t the answer: It’s inequitable, not every city has those resources.”

In Michigan, a municipal financial emergency is defined as a state of receivership. The state’s financial  emergency status, along with the Emergency Financial Manager was first created in in 1988, but replaced in 2011, and then, in 2012, voters replaced that with Public Law 436, the Local Financial Stability and Choice Act, which includes several triggers for a preliminary review:

  • board requesting a review via resolution,
  • local petition of 5 percent of gubernatorial election voters requesting one,
  • creditor’s written request,
  • missed payroll,
  • missed pension payments,
  • deficit-elimination plan breach or lack of such a plan within 30 days after its due day,
  • a legislative request.
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