Michigan in transition: Symposium addresses restructuring of governance through privatization and corporatization

 By Steve Thorpe

Legal News
At an all-day symposium at Wayne State University Law School on Friday, March 23, Michael L. Stampfler could boast one qualification that his fellow panelists on “The Emergency Manager: Restructuring Decision Making” discussion lacked.
He’s been one.
What conclusion does he draw from that hands-on experience with Public Act 4, which created “emergency managers?”
“The overall impression I would like to leave people with here today is that, really, Public Act 4 does not work,” Stampfler said. “It does not address the long-term situation.”
Stampfler was appointed as the second financial manager of Pontiac. When Gov. Rick Snyder signed Public Act 4 of 2011, his title was officially changed to Emergency Manager and he was given sweeping new powers. He quickly gained a reputation as a cost cutter, slashing jobs and programs. After 14 months of wrestling with the city’s woes, he resigned in September 2011.
Of the emergency manager solution, Stampfler said, “A number of communities have, what I call, ‘recycled’ through Public Act 72 and now Public Act 4. They have lived this crisis once to come out of the situation for only a short time and then re-enter or ‘recycle’ back into that situation. We know the communities ... Ecorse, Flint ... are all teetering in the same situation over and over and over again. I see nothing, from practical experience, that allows that cycle to be changed.”
Panelist Eric Scorsone of the Michigan State University State and Local Government Program agreed.
“Cities like Flint and Detroit face long-term problems. Even if we fix the problems today, the problems are continuing to compound themselves,” he said.
And Detroit City Council Member Saunteel Jenkins stressed that financial disasters are not completely homegrown.
“We have our problems. We’re working on that. But they weren’t caused just by Detroiters,” Jenkins said.
“In 2001, the City of Detroit got about $360 million is state revenue sharing. Last year we got about $140 million,” she continued. “We entered into an agreement in the ‘90s that said we won’t increase our taxes as long as you continue to provide us with state revenue sharing. We’ve lived up to our end of the agreement. However, the legislators decided, ‘Well, it’s tight in Lansing so, rather than tighten our belts, we’ll reduce the amount of money we’re sending to Detroit.’”
The panelists agreed that the current financial crisis facing some Michigan cities didn’t sneak up on us.
“The challenges are longstanding,” Scorsone said. “Detroit’s issues go back all the way to the 1960s. A Wayne State report in 1960 predicted that Detroit would face serious problems from its pension system. They actually underestimated how significant it might be.”
Panelist Linda Kaboolian, lecturer at the Kennedy School of Government at Harvard University, likened the trend to a force of nature and blames, at least in part, changing attitudes on taxation.
“In 1985, I could see the stirrings of an assault on the public sector and public sector taxation, the same way a surfer can see the beginning of a wave forming way out there,” she said. “That surfer knows it’s gonna take a while, but that wave is gonna be a monster. The perfect wave has hit a number of cities and Detroit is one of the ones that’s been inundated. What created the tsunami? There has been a reduction in the amount of taxation going from the state to the city.”
Jenkins points out that the state of Michigan has been confronted with its own financial woes and deals out a harsh remedy to cities that it wouldn’t like to receive itself.
“The state, based on the criteria of Public Act 4, was also financially distressed and had a deficit when the act was passed,” she said. “They met every single criteria in the bill. I guarantee you, nobody would’ve supported the federal government coming in and taking over the State of Michigan. Why is it allowable for municipalities?”
Jenkins also bemoaned temporarily setting aside representative government, no matter how bad the crisis.
“(An Emergency Manager) has the power to dissolve or disincorporate a municipality. Imagine one man or woman deciding whether Detroit should continue to exist as a city. In my mind, it’s ludicrous.”
Stampfler stressed that he believes that some cities are actually in worse shape when they exit the emergency management scheme. They may temporarily have balanced their books, but are vulnerable to quickly re-entering the situation that led to the crisis.
“Most of the nomenclature and particulars in the act refer always to this financial drive to get revenue and expenses back in order,” Stampfler said. “It’s virtually impossible to do that in the current situation without causing a great deal of damage and again, furthering this possibility of ‘recycling.’ In common parlance, it amounts to ‘kicking the can down the road.’”
He also cites what he believes is irreparable damage to civic institutions from emergency management and the difficulty encountered by elected officials when they try to resume control.
“The system we’re working under right now, I think, does much to damage ‘civic capital,’ which is the capacity for governance within the community,” Stampfler said. “For example, it casts aside the mayor and the council for maybe five years. And, yes, we have certain duties they can attend to—ribbon cuttings and what have you—but then, to say at the end of that period, ‘Well, here’s your city back,’ is crazy.”