MSUToday
Published: Jan. 26, 2016

Flint crisis reveals deeper problem in Michigan’s fiscal policies

Contact(s): Joshua Sapotichne Political Science office: (517) 355-4859 sapotich@msu.edu, Eric Scorsone Extension office: (517) 353-9460 scorsone@msu.edu, Andy Henion Media Communications office: (517) 355-3294 cell: (517) 281-6949 Andy.Henion@cabs.msu.edu

The toxic-water crisis in Flint reveals a much bigger problem with the way the state of Michigan treats its local governments, say Michigan State University researchers Eric Scorsone and Joshua Sapotichne.

Flint was under control of a state-appointed emergency manager in 2014 when it switched its water supply to the Flint River – a temporary solution expected to save the cash-strapped city $5 million in just two years. But the water corroded city pipes and caused dangerously high levels of lead to leach into the drinking water, experts say.

While Flint residents deal with the ramifications of that move, political scientist Joshua Sapotichne said the Flint crisis reveals a deeper issue with Michigan’s policies toward its municipalities. Sapotichne and economist Eric Scorsone, founding director of the MSU Extension Center for Local Government Finance and Policy, have conducted extensive research into state takeovers of financially beleaguered cities such as Flint and Detroit.

“Flint’s crisis shows the risks of Michigan’s pressure-cooker policies for dealing with financially troubled municipalities,” Sapotichne said. “Michigan has created an environment in which the state tightens the screws on local governments – by choosing at nearly every turn to use the stick instead of the carrot.” He said the consequence of the “stick approach” puts local governments, even well-managed ones, at risk of a financial crisis, especially in the face of severe economic declines like in 2008-09.

The “pressure cooker” manifests in two significant ways:

*On the front end, Michigan has some of the most restrictive fiscal policies in the nation that make it difficult for cities and other local governments to raise taxes and fees for basic services and deteriorating infrastructure. State funding has also been cut to municipalities. Finally, local governments are reeling from massive legacy costs such as retiree health care and pensions. “Add all these factors together and it’s very hard for local governments to keep their heads above water,” Sapotichne said.

*On the back end, Michigan’s emergency manager law is a “ takeover model” in which one person is put in charge of balancing a city’s budget in a relatively short time. This model is designed to quickly address a financial crisis and in some cases has proven effective at addressing political and financial mismanagement. However, “the policy does next to nothing for addressing underlying structural causes of local distress, while putting a local financial manager in a position in which he or she must quickly master a complex mix of local conditions,” Sapotichne said.

“Having one person as the decision maker, the idea is that you can get things done quickly and efficiently, but most of these emergency managers are people like city managers and financial experts,” Scorsone told Fortune magazine. “They don’t have the expertise they need. They aren’t civil engineers, and they aren’t health experts. You need to have other voices in the room.”

Sapotichne noted that states such as Pennsylvania use the carrot approach when dealing with financially beleaguered cities. The state works collaboratively with the municipalities to tackle both internal and external conditions that hamper a city’s ability to maintain fiscal solvency, and local officials such as mayors and city councils are given a say in turnaround efforts.

Further, while Michigan’s financial emergency efforts are controlled by the state treasury department, Pennsylvania’s are run by a community economic development agency that has broader expertise in various local affairs such as poverty, public health and infrastructure.

Sapotichne and Scorsone argue that the Flint water crisis demonstrates the consequences of less collaborative state-local relations.

“Michigan absolutely needs a state agency that considers the connection of these issues for all local governments, not just those in financial trouble,” Sapotichne said. “That builds rapport, helps build capacity, and is a direct link between local governments and the problems they’re facing and the decision-makers at the state level.”

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