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The Republican-controlled Michigan House on Wednesday approved a replacement for an emergency manager law struck down by voters in the November election, despite Democratic complaints that it doesn't differ significantly from what voters rejected and would still subvert local control, CBS News reported today. The Senate is expected to review the legislation today. Gov. Rick Snyder has endorsed the proposal, which includes a $770,000 appropriation to cover managers' salaries. A new version proposed by Snyder and GOP legislative leaders gives four options to communities in dire financial straits: accepting an emergency manager; undergoing bankruptcy; going through mediation; and entering a consent agreement similar to an existing one between the state and Detroit. Rochester Hills Republican Rep. Tom McMillin said that the legislation is needed for local governments "that refuse to deal with their spending problems." However, Rep. Maureen Stapleton, a Detroit Democrat, said that the new bill is essentially the same as the rejected law and merely offers local governments an opportunity to "pick their poison." Places targeted by the legislation are being blamed for problems not entirely of their making, she said. Officials in Detroit are trying to fend off appointment of a manager, but state treasurer Andy Dillon this month announced a potential first step in that direction, saying he was leaning toward ordering a review of the city's finances. Detroit is deeply in debt and has a budget deficit exceeding $200 million.

Vallejo's first contract negotiated since the city left chapter 9 bankruptcy in November 2011 will take longer than expected to complete, city officials said this week, The (Vallejo) Times-Herald reported today. Contract talks that began in June, however, will continue, and an impasse is not on the horizon, city and unions officials said. The International Brotherhood of Electrical Workers contract expires at the end of December. City Manager said current contract provisions will be extended after the expiration, and talks are scheduled to continue into next year, City Manager Dan Keen said. "The city is hopeful that the parties will reach an agreement in early 2013," said Keen, adding that although the city's five-year post-bankruptcy plan does call for concessions from all labor groups, Vallejo's fiscal year budget does not contemplate any more savings from the IBEW contract negotiation. The year's contract talks appear to be in marked contrast to the contentious battle between IBEW and the city three years ago. Ultimately, a federal bankruptcy judge had to order IBEW to renegotiate its contract after approving the city's plan to throw out the existing contract. Later, when talks continued to stall, the council considered imposing a one-year contract on the union if it could not come up with more than $3.4 million in spending cut recommendations. IBEW ultimately presented a plan that the Vallejo City Council adopted in late 2009.

Cash-strapped Detroit is set to receive $10 million from Michigan after the city council dropped its opposition to a key measure on Tuesday, Reuters reported yesterday. The state has also begun a review of the city's finances that could lead it to file the biggest municipal bankruptcy ever in the United States. Terry Stanton, a spokesman for Michigan's Treasury Department, said the council's action met conditions agreed to by the state and Mayor Dave Bing for the release of $10 million raised through a bond sale earlier this year. The release of another $20 million remains tied to the city's meeting other conditions, he added. Michigan launched a process on Tuesday that could result in an emergency financial manager for the city, who could decide with the state's consent if Detroit should file for bankruptcy protection from creditors. In a 5-4 vote, the council approved the appointment of law firm Miller Canfield to work on issues related to a consent agreement that earlier this year gave the state some oversight of Detroit's finances. Other measures the state has tied to the release of some bond money also received council approval, including contracts for auditing services and for specific audits to uncover potential worker's compensation fraud and to determine dependent eligibility for city benefits. Mayor Bing reiterated that he is working to avoid the appointment of an emergency manager by the state.

Jefferson County commissioners indicated that they hope they are taking another step closer toward getting out of bankruptcy, Fox News reported yesterday. Jefferson County Commission President David Carrington and Commissioner Jimmie Stephens are heading to New York today, where they will meet with officials from the New York State Insurance Department. One point of contention is settling on a price for revamping the county's sewer system. "It's not just a number with creditors. It's who will pay what to get that number," said Carrington. "Certain creditors wouldn't mind if everyone else did the concessions." The cost of making sewer improvements skyrocketed once the county entered into a bond deal after the economy receded. The commissioners met with creditors last month in Los Angeles seeking a consensus agreement over a plan of adjustment to get out of bankruptcy. Carrington says that although he doubts that this trip will reach a deal, he hopes to see a framework agreement by February.

Detroit's oversight board unanimously voted on Monday to support a move by Michigan's treasurer to begin a process that will likely lead to the state appointing an emergency financial manager for the city, Reuters reported yesterday. Frustrated by the slow pace of fiscal reform and worried about Detroit's long-term viability, the state is poised to start a 30-day preliminary review as early as today to determine the extent of the city's financial crisis, said Terry Stanton, a spokesman for the Michigan Treasury Department. A report by city officials to Detroit's financial advisory board on Monday indicated that the city's cash-flow position could erode in the fiscal year that ends June 30 to a negative $113.7 million from a negative $76.7 million that was forecast last month. The appointment of an emergency manager would bring Detroit a step closer to a possible bankruptcy filing, as would legislation that could be passed by the Michigan Legislature this month that would give fiscally struggling local governments like Detroit options including chapter 9 municipal bankruptcy, emergency managers and consent agreements. Detroit avoided getting an emergency manager earlier this year by signing a consent agreement that gave the state some oversight of Detroit's finances. However, Mayor Dave Bing and the nine-member city council have been at odds over some of the measures the mayor and state officials believe will lift Detroit out of its fiscal hole.

Detroit Mayor Dave Bing announced at a press conference Friday afternoon that the city would lay off 400-500 workers over the next few months, NBC News reported Friday. The city continues to struggle to fix its troubled finances and stave off a possible chapter 9 bankruptcy, even as the mayor and city council clash over how to solve the problem. "I do understand the frustration with the treasurer and the governor because we are equally frustrated," Bing said. State Treasurer Andy Dillon met with the city's mayor and council this week. He is expected to order a preliminary review of the city's finances next week, a step that could lead to having a state-appointed manager take over the city's finances. "If they want to move forward with an emergency financial manager — I don't agree with it — but that's not my decision. I don't think it's the appropriate decision," Bing said. "At this point, it doesn't appear to me that a chapter 9 filing will occur anytime in the near future," said George B. South III, a partner at law firm DLA Piper who represents one of the city's creditors. The likely forthcoming preliminary review would take up to 30 days. Depending on what it finds, this could be followed up by a more extensive, 60-day review, although the governor's office has the ability to expedite or extend that timeframe.

Under proposed Senate Bill 865, Detroit and other financially troubled cities would have the option of electing to declare municipal bankruptcy instead of being run by state-appointed managers under a proposal to replace the emergency manager law that state voters repealed last month, The Detroit News reported yesterday. The state's House Local, Intergovernmental, and Regional Affairs Committee advanced the bill to the House floor Thursday morning, less than a day after it was unveiled by Gov. Rick Snyder's administration. Snyder and Republican lawmakers are pursuing a replacement of Public Act 4, the emergency manager law voters rejected in the Nov. 6 election, contending that the repeal of the law doesn't eliminate the financial emergencies facing Detroit, Detroit Public Schools, Pontiac and other cities and school districts. The Snyder administration says that the current emergency financial manager law, Public Act 72, is not effective in addressing the cash flow and legacy costs that are pushing some Michigan cities and school districts to the brink of insolvency. Senate Bill 865 would give financially strapped cities and school districts the option of mediation, a financial consent agreement such as Detroit's current arrangement, an emergency manager or chapter 9 bankruptcy. Nick Ciaramitaro, a lobbyist for AFSCME, a union that represents municipal employees, said that the new bill "re-enacts" P.A. 4, adding that "the Legislature would ignore the will of the people and re-enact the bill… Under this bill, all roads lead to an emergency manager."

Rhode Island, the site of a sweeping pension overhaul last year, has brought in a prominent New York lawyer to litigate the question of whether a judge ruled impartially on pension cuts when her mother, her son, her uncle and even she herself all have a stake in preserving the status quo, the New York Times reported today. David Boies, perhaps best known for representing Al Gore in the fight over the 2000 presidential election and for waging an antitrust battle against Microsoft on behalf of the government in the 1990s, has been hired in the case. Rhode Island’s dispute is being closely watched as a first major test of whether, and how, financially strained states and cities can cut the benefits of their workers and retirees. Several public employee unions have sued Gov. Lincoln Chafee and other Rhode Island officials, accusing them of acting illegally when they pushed through a package of money-saving pension cuts last year, including suspending annual cost-of-living increases for most retirees. The unions want the richer benefits restored. Their five pension lawsuits were assigned to Judge Sarah Taft-Carter of the state Superior Court, who has handled public pension cases before and handed a big victory to the unions in one recent case. Boies, who at $50 an hour is working for a small fraction of his ordinary fee, is seeking a less conflicted judge, and could even ask to move the case into federal court.