Summary of the Local Government and
School District Fiscal Accountability Act Process
|Step One:||If one or more conditions indicative of probable financial stress in a local government exist, the State Financial Authority (State Treasurer or Superintendent of Public Instruction) may conduct a preliminary review, after providing the unit of local government with specific written notification of the review.|
|Step Two:||The State Financial Authority must inform the Governor within 30 days of commencement of the preliminary review whether or not probable financial stress exists.|
|Step Three:||The Governor must appoint a review team if the State Financial Authority informs the Governor that a preliminary review has been conducted and a finding of probable financial stress was made.A review team consists of the State Treasurer (or his or her designee), the Director of the Department of Technology, Management, and Budget (or his or her designee), a nominee of the Senate Majority Leader, a nominee of the Speaker of the House of Representatives, and any other State officials, or other persons with relevant professional experience selected by the Governor. The Superintendent of Public Instruction (or his or her designee) also is a member if a school district is involved.|
|Step Four:||Unless the Governor specifies an earlier date, or grants a 30-day extension, a review team must report to the Governor within 60 days of its appointment and indicate whether specific statutory conditions exist or are likely to occur which constitute no or mild financial stress, severe financial stress, or financial emergency:(a) No or mild financial stress exists in the unit of local government if any of the following occur:
(b) Severe financial stress exists in the unit of local government if any of the following occur:
(c) A financial emergency exists in the unit of local government if:
|Step Five:||Within 10 days after receipt of the review team report, the Governor must make one of the following determinations:(a) The unit of local government is not in a condition of severe financial stress.
(b) The unit of local government is in a condition of severe financial stress, but a consent agreement containing a plan to resolve the severe financial stress has been adopted.
(c) A local government financial emergency exists and no satisfactory plan exists to resolve the emergency.
(d) The unit of local government entered into a consent agreement containing a continuing operations plan or recovery plan to resolve a financial problem, but materially breached the consent agreement.
|Step Six:||If the Governor determines that a financial emergency exists, he or she must provide written notification to the chief administrative officer of the unit of lo-cal government who may request, within seven days after receiving notice, a hearing conducted by the State Financial Authority or his or her designee.|
|Step Seven:||After the hearing or, if no hearing was requested, after expiration of the opportunity for a hearing, the Governor must either confirm or revoke the determination of a financial emergency.|
|Step Eight:||A local government, with a two-thirds vote of its governing body, may appeal the Governor’s determination to Ingham County circuit court. The determination may be set aside only if found to be either:(a) Not supported by competent, material, and substantial evidence on the whole record.
(b) Arbitrary, capricious, or clearly an abuse or unwarranted exercise of discretion.
|Step Nine:||If the Governor confirms the determination of a financial emergency, the Governor is required to declare the unit of local government in receivership and appoint an Emergency Manager who serves at the pleasure of the Governor.|
|Step Ten:||Upon being placed in receivership, the governing body and chief administrative officer of the unit of local government are prohibited from exercising any of their powers of offices without written approval of the Emergency Manager, and their compensation and benefits are eliminated.|
|Step Eleven:||Within 45 days of appointment, an Emergency Manager must develop a written financial and operating plan.In addition to other powers, an Emergency Manager may reject, modify, or terminate collective bargaining agreements, recommend consolidation or dissolution of units of local government, and recommend bankruptcy proceedings.|
|Step Twelve:||A unit of local government is removed from receivership when the financial conditions which were the basis for the underlying financial emergency are corrected in a sustainable fashion as determined by the State Treasurer in accordance with the Act.|