Detroit pension systems challenge Emergency Manager law

Benton Harbor may be the first city in the state to be completely taken over by an Emergency Manager under a new law that grants such appointees nearly unlimited power over local governments, but the first legal challenge has been filed by two Detroit pension boards.

Detroit’s city pension systems — the General Retirement System of the City of Detroit and the Police and Fire Retirement System of the City of Detroit — filed suit against Gov. Rick Snyder and state Treasurer Andy Dillon in federal court this week in an effort to block provisions of the Emergency Manager law that change the city charter and collective bargaining agreements and allow pension fund trustees to be removed.

The retirement systems, which represent about 32,000 current and retired city workers, argue that the new law gives the governor and state treasurer, through the emergency manager, “virtually unchecked power to seize administration and control of the Detroit Retirement Systems and potentially attempt to transfer their assets to any other retirement system.”

Allowing Emergency Managers to take over pension funds will illegally change collective bargaining agreements and violate the property rights of city workers, they say, and they argue that the move also disenfranchises city voters by amending the city charter, which gives Detroit the authority to create and maintain retirement systems for its employees.

The Emergency Manager law raced through the approval process in just a few weeks and there has been little public discussion of how it fits with existing law.

In a Slate.com article that was circulated in the Michigan State Bar Association newsletter the day after the EM bill was enacted, Stanford University law professor Richard Thompson Ford wrote that those who criticize the bill as similar to anti-democratic measures enacted by military dictatorships “have no legal argument.”

There is no constitutional right to local self-government in the United States. In 1907, the Supreme Court decided, in Hunter v. Pittsburgh, that under the Constitution local governments are nothing more than “convenient agencies for exercising … such powers as may be entrusted to them” by the state. As a result, “the state may modify or withdraw all such power, may take without compensation such property, hold it for itself, or vest it with other agencies, expand or contract the territorial area, unite the whole or part of it with another municipality, repeal the charter and destroy the corporation … with or without the consent of the citizens, or even against their protest.”

Tom Stephens, a National Lawyers Guild member in Detroit [who works for the Detroit city council but analyzed the bill on his own time] said that Ford’s argument leaves out some important aspects of Hunter v. Pittsburgh.

That case involved a challenge by voters in Allegheny, Pennsylvania to a state law that allowed the town to be merged with Pittsburgh, he wrote in a response piece that was rejected by Slate. The court found that PA did not violate its constitution by taking over the town because the PA constitution did not give people a voice in local government.

Michigan’s 1963 constitution does give local communities the power to adopt and amend their own charters, Stephens writes, and it also says that powers should be “liberally construed” to favor local governments.

“It is true as a matter of state law that the State of Michigan, if it chose to do so, could eliminate local government jurisdictions and govern them directly … The State has the power to create cities, townships, villages and counties, and it can legally eliminate them as well.”

But the Emergency Manager law doesn’t simply dissolve local governments, he writes, it installs unelected managers to run them without regard for the local laws adopted by the people who live there.

“The act makes an emergency manager a local official to whom it unlawfully delegates state legislative power, without providing sufficiently precise standards to guide the exercise of such power. It also makes an emergency manager an unelected state official who governs pre- and currently- existing communities, without any effective legal constraints at the local level, abolishing elected, representative democratic governance and all fundamental personal rights of residents of the community.”

And though the new Emergency Manager act is supposed to promote “fiscal accountability,” it lacks both standards for achieving that result and measures to ensure that Emergency Managers don’t do things that violate people’s constitutional rights, Stephens writes.

In maintaining local units of government as legal entities, while simultaneously claiming to govern them by fiat through the unconstrained will of one official as an agent of the governor and state treasurer, the Act violates multiple constitutional protections and enables further arbitrary violations of rights.

The Act’s grant of legislative power to an emergency manager is a broad, unconstitutional delegation of legislative power. The Act lacks any real standards at all, much less the constitutionally required “reasonably precise” standards, to guide the uncontrolled discretion of this official, backed by the governor and the state treasurer, in destroying the constitutionally protected power of self-government, and the rights of people to be protected from arbitrary government actions, and to exercise the voting franchise.

In short, the emergency manager is to act as the local governing body of communities that are already established units of local government, pursuant to the State Constitution and their legally protected right to establish local government charters. But the State and Federal Constitutions say it cannot lawfully do that.”

Which of these legal theories will be upheld by the courts remains to be seen. The state has yet to file a response to the complaint from the Detroit pension boards, which was filed in the U.S. District Court for the Eastern District of Michigan.