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2011 Bargaining BOOT CAMP

2011 Bargaining BOOT CAMP. KINGS AND DICTATORS: THE EMERGENCY MANAGER LEGISLATION ARTHUR R. PRZYBYLOWICZ MEA GENERAL COUNSEL FRIDAY, MARCH 25, 2011. PUBLIC ACT 4 OF 2011. The Local Government and School District Fiscal Accountability Act.

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2011 Bargaining BOOT CAMP

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  1. 2011BargainingBOOT CAMP KINGS AND DICTATORS: THE EMERGENCY MANAGER LEGISLATION ARTHUR R. PRZYBYLOWICZ MEA GENERAL COUNSEL FRIDAY, MARCH 25, 2011

  2. PUBLIC ACT 4 OF 2011 • The Local Government and School District Fiscal Accountability Act. • Adopted at the same time were amendments to several existing laws, including the Revised School Code (PA 8) and the Public Employment Relations Act (PA 9).

  3. WHO IS COVERED BY THE LAW? Cities, Villages, Townships, Charter townships, Counties, Public utilities owned by a city, village, township, or county, School districts, Intermediate school districts.

  4. WHO IS NOT COVERED BY THE LAW? Charter schools!

  5. APPLICATION TO SCHOOL DISTRICTS • The Superintendent of Public Instruction may conduct a preliminary review to determine the existence of a local government financial problem upon: • 1. Request of the school board or superintendent. • 2. Request of creditor with claim for greater of $10,000 or 1% of general fund budget, whichever is greater. • 3. Petitions from voters totaling at least 5% of the number of votes cast for Governor. • 4. Failure to pay wages, salaries, or other compensation more than 7 days after they were due to be paid.

  6. APPLICATION TO SCHOOL DISTRICTS • 5. Defaulting on a bond or violating a bond covenant. • 6. A resolution from either the Senate or House of Representatives requesting a preliminary review. • 7. Violating any laws governing the issuance of bonds. • 8. Violating a requirement of the Uniform Budgeting Act. • 9. Failing to timely file annual audit that conforms to minimum procedures of Superintendent of Public Instruction. • 10. Failing to forward taxes collected for another governmental entity. • 11. Violating any term of a deficit elimination plan.

  7. APPLICATION TO SCHOOL DISTRICTS • 12. A court ordering a tax levy on the school district. • 13. Ending a fiscal year in a deficit in 1 or more funds and not submitting a deficit elimination plan in 30 days. • 14. Receiving a long-range bond rating below BBB. OR…

  8. APPLICATION TO SCHOOL DISTRICTS THE EXISTENCE OF OTHER FACTS OR CIRCUMSTANCES THAT IN THE SUPERINTENDENT OF PUBLIC INSTRUCTION’S SOLE DISCRETION ARE INDICATIVE OF SCHOOL DISTRICT FINANCIAL DISTRESS.

  9. SCHOOL DISTRICT FINANCIAL REVIEW TEAM Upon a finding of school district financial stress, a committee is appointed, consisting of: • State Treasurer or designee, • Superintendent of Public Instruction or designee, • Director of Technology, Management, and Budget or designee, • Nominee of Senate majority leader, • Nominee of Speaker of House, • Any others the Governor chooses to appoint.

  10. SCHOOL DISTRICT FINANCIAL REVIEW TEAM May negotiate consent agreement with superintendent of school district. • Continuing operations plan. • Recovery plan Consent agreement may grant to school district superintendent, CFO, or school board the powers of an Emergency Manager, except the power to terminate collective bargaining agreements. A material breach of the consent agreement results in an Emergency Manager taking over.

  11. SCHOOL DISTRICT FINANCIAL REVIEW TEAM • The Review Team submits a report to the Governor. The report must include the existence or “an indication of the likely occurrence” of any of the following: 1. A default in a bond payment. 2. Failure for 30 days to transmit taxes withheld or contribution to a benefit plan. 3. Failure to pay wages and salaries or other compensation owed to employees for 7 days after they were due.

  12. SCHOOL DISTRICT FINANCIAL REVIEW TEAM • 4. Accounts payable exceed 10% of total expenditures. • 5. Failure to eliminate a deficit for 2 years. • 6. Projecting a deficit in excess of 5% of revenues. • 7. Failure to comply with a deficit elimination plan. • 8. Existence of increasing loans to the general fund. • 9. Existence of recurring unbudgeted subsidies from general fund to other funds. • 10. Existence of a structural operating deficit. • 11. Improper use of restricted funds. OR…

  13. SCHOOL DISTRICT FINANCIAL REVIEW TEAM ANY OTHER FACTS AND CIRCUMSTANCES INDICATIVE OF SCHOOL DISTRICT FINANCIAL STRESS OR FINANCIAL EMERGENCY.

  14. SCHOOL DISTRICT FINANCIAL REVIEW TEAM Review team will make 1 or 4 recommendations in report: • School district not in financial stress or mild stress. • School district is in severe financial stress, but consent agreement entered into. • School district in severe financial stress without a consent agreement. • A financial emergency exists.

  15. GOVERNOR’S INPUT • Within 10 days of receiving report, Governor shall make 1 of the 4 determinations. • If Governor finds financial emergency, then school district has 7 days to request hearing before Superintendent of Public Instruction. • Following the hearing, the Governor shall either confirm or revoke his determination of a financial emergency.

  16. “APPEAL RIGHTS” • School board by 2/3 majority, may appeal to the Ingham County Circuit Court. • Court must agree with Governor, unless: • Not supported by competent, material, and substantial evidence on the whole record or the decision is • Arbitrary, capricious, or clearly an abuse of discretion.

  17. RECEIVERSHIP • Once financial emergency is confirmed, Governor appoints an Emergency Manager (EM a/k/a Dictator). • EM acts for and in the stead of the public body. • EM qualifications: 5 years experience and “demonstrable expertise” in business, financial, or local or state budgetary matters. Serves at the pleasure of Governor, subject to impeachment by the Legislature.

  18. EMERGENCY MANAGER ORDERS • The EM may issue orders to officials and employees of the public body that EM considers necessary to implement this law, including developing a financial and operating plan that has an academic and educational plan. • If EM is not satisfied that official or employee is properly carrying out those orders, EM may remove official or employee from access to facilities, e-mail, and internal information systems.

  19. FINANCIAL AND OPERATING PLAN • Within 45 days, EM shall submit a financial and operating plan, including an academic plan, to the state Treasurer and Superintendent of Public Instruction. • The Plan shall detail the need for the “modification, rejection, termination, and renegotiation of contracts” and a plan for the payment of all debt services on bonds.

  20. “PUBLIC INPUT” • Within 30 days of submitting the Plan, the EM shall conduct a public informational meeting on the Plan. • However, this does not mean that EM must receive public approval before or while implementing the Plan.

  21. POWERS OF THE EM Just a few of the enumerated powers of the EM: • 1. Analyze circumstances contributing to financial crisis. • 2. Develop and approve budget. • 3. Receive and disburse all funds of the school district. • 4. Develop plan for paying all outstanding debts. • 5. Identify and require the types of reports to be issued. • 6. Subpoena power for witnesses and documents relevant to an analysis of the financial condition of the school district. • 7. Make, approve, or disapprove any appropriation, contract, expenditure, loan, new position, or filling of any vacancy.

  22. POWERS OF THE EM • 8. Review payrolls and other claims before payment. • 9. Establish and implement staffing levels. • 10. Reject, modify, or terminate 1 or more terms and conditions of an existing contract. • 11. Reject, modify, or terminate 1 or more terms and conditions of an existing collective bargaining agreement.

  23. TERMINATING COLLECTIVE BARGAINING AGREEMENTS • In order to reject, modify, or terminate 1 or more provisions of a collective bargaining agreement, EM must: “Meet and confer” with bargaining representative. If, in sole discretion of EM, “a prompt and satisfactory resolution is unlikely to be obtained,” then contract may be terminated. Termination is appropriate if the EM and state Treasurer determine that: 1. The financial emergency makes it reasonable and necessary. • It is reasonable and necessary to deal with a broad, generalized economic problem. • It is directly related and designed to address the financial emergency. • The termination is temporary and does not target specific classes of employees.

  24. THE ULTIMATE ENUMERATED EM POWER “Take any other action or exercise any power or authority of any officer, employee, department, board, commission, or other similar entity of the local government, whether elected or appointed, relating to the operation of the local government. The power of the emergency manager shall be superior to and supersede the power of any of the foregoing officers or entities.”

  25. ADDITIONAL EM POWERS IN SCHOOL DISTRICTS • In addition to those powers, EM in a school district may: • Negotiate contracts on behalf of school district. • Receive and disburse all federal, state, and local funds. • Seek approval from Superintendent of Public Instruction for a reduced class schedule. • Sell assets of the district to pay creditors, so long as it does not impair the education of the pupils of the district. • Approve the issuance of obligations of the district. • Exercise solely all other authority and responsibilities prescribed by law to the school board or superintendent. • Employ or contract for school administrators.

  26. IMMUNITY FROM LIABILITY • Like all dictators, EMs are immune from liability for any of his or her actions. • The Attorney General shall defend the EM in any legal action challenging the law or the EM’s authority and the attorney fees, costs, and expert witness fees incurred by the Attorney General are added to the debt of the school district. • The salary and expenses of the EM and any others hired to assist the EM are the responsibility of the school district.

  27. ELIMINATION OF COLLECTIVE BARGAINING • A local government placed in receivership has no duty to bargain for 5 years from the date it was placed in receivership or until the end of the receivership, whichever occurs first. • Prior to terminating the receivership, the EM shall adopt and implement a 2-year budget to begin upon termination, including all contractual and employment agreements. • The budget may not be changed during that 2-year period without the approval of the state Treasurer.

  28. 2011BargainingBOOT CAMP KINGS AND DICTATORS: THE EMERGENCY MANAGER LEGISLATION ARTHUR R. PRZYBYLOWICZ MEA GENERAL COUNSEL FRIDAY, MARCH 25, 2011

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