Financial emergency

Financial emergency is a state of receivership for the State of Michigan's local governments.

A state court appointed in 1986 a receiver, Louis Schimmel, over the city of Ecorse which had a $6 million deficit. The court appointed receivership lasted until 1990.

The financial emergency status, along with the Emergency Financial Manager (EFM) position, was first created in Public Act 101 of 1988 for the specific emergency in Hamtramck. Public Act 101 was amended by Public Act 72 of 1990, allowing an Emergency Financial Manager to be appointed for any local governmental unit. PA 72 in turn was replaced by Public Act 4 of 2011, which renamed the position to Emergency Manager (EM) and gave the Manager additional authority.

When the Referendum petitions were approved by the Michigan State Board of Canvassers on August 8, 2012 under orders from the Michigan Supreme Court, PA 4 was suspended and the previous version, PA 72, was reinstated. All current EM except for Michael Brown in Flint were reappointed as EFM by the Local Emergency Financial Assistance Loan Board. Brown was previously a Flint City employee in the past five years and was not eligible under PA 72 to be an EFM. The Sugar Law Center filed to challenge PA 4 and PA 72. PA 4 was repealed by Michigan voters in the 2012 general election, and the Michigan Legislature subsequently passed Public Act 436 of 2012 to replace the revived Public Act 72.

On May 1, 2013, the City of Ecorse was moved from under an emergency manager to a transition advisory board, which includes the previous emergency manager. On July 2, a school district dissolution provision was passed into law allowing financially struggling school districts to be dissolved. On July 18 with the Governor's authorization, Detroit's manager filed Chapter 9 bankruptcy. In August, a transition advisory board was appointed for the City of Pontiac which included the then emergency manager.

For the City of Detroit, the state legislature passed a separate law forming a financial review commission to exercise financial check on city government as it exited bankruptcy and emergency management.

...
Wikipedia