Returning from fantasyland

The debate over North Carolina’s state budget has pitted those wedded to the status quo — who seem to believe a fantasy that some miracle will enable North Carolina to afford unsustainable government programs — versus those who want to rein in spending to levels the state’s taxpayers can afford now and in the future.

A Bloomberg Businessweek article about Michigan highlights what can happen when a state and its local governments wait too long to return to reality from fantasyland. A Republican governor and Democratic state treasurer have pushed for major change:

In their four months in office, they have overseen the passage of a law that’s as radical an experiment as any in the country. It dramatically speeds up the process by which financially troubled cities, towns, and school districts can be taken over by state-appointed emergency managers.

The law gives those managers—often former politicians or civil servants—broad and controversial powers, including the authority to void union contracts and remove elected officials. It has also given other outsiders, namely private consultants and restructuring experts, an opportunity to do to distressed places what they’ve done to distressed companies. “Ninety percent of the law is an early warning system,” says Representative Al Pscholka, who sponsored it. “The fundamental point is that if the municipality had made the hard choices there would be no need for an emergency manager.”

Michigan is the perfect petri dish for experimental cures in crisis management. Michigan State University economist Eric Scorsone says half the state’s communities are under financial stress; unemployment has been above 10 percent for the past three years; of nearly 5 million taxpayers, 200,000 are in arrears; and it’s the only state to experience a decline in population since 2000. Still, when the Michigan legislature passed Public Act 4 on Mar. 15, protesters were outside the Capitol in Lansing waving signs that read “Privatize Snyder” and “Recall the Ricktator.” Snyder says he doesn’t want to exert control over local governments. His intention is the opposite: to identify struggling localities early on and give officials the motivation and help to make difficult decisions about layoffs, service and pension cuts, property sales, privatization—and even the dissolution of entire towns and school districts if necessary. Senator Jack Brandenburg of Harrison Township put it more bluntly: Emergency managers would be deployed as a last resort in communities that need “financial martial law.”

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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