What Does the So-Called Corporate Takeover of Government Mean?

Democracy has failed in Michigan.  In November, 2012, voters repealed a state law permitting the governor to impose state appointed austerity fiscal managers on local jurisdictions, but the legislature came back by the end of the year with a new, un-repealable, emergency manager law.  For years the state emergency managers running Flint’s water system have insulted citizens who complained about water quality at the same time the same officials knew about the rising level of lead and other toxic substances in the water but kept poisoning Flint’s children anyway.  And state emergency managers in Detroit’s public schools have run up a cumulative deficit of $3.5 billion at the same time they have neglected the decaying conditions in which children are expected to learn and teachers to work.  Citizens in Michigan’s poorest communities have been rendered powerless by the loss of checks and balances.

Through weeks’ of rolling sick-outs, Detroit’s teachers have tried to bring attention to the roof leaks and buckling gym floors and rodents (alive and dead) littering the buildings where they work.  Although photographs in newspapers have been distressing,  Michigan’s laws, as they have been adjusted in recent years, don’t really provide a path for citizens to regain control.  So last Thursday, according to Corey Mitchell writing for Education Week,  “The Detroit Federation of Teachers, along with the American Federation of Teachers… filed a lawsuit against Detroit public schools and Emergency Manager Darnell Earley, alleging that the district has failed to ‘provide a minimally adequate education and to properly maintain the schools.’  Parents and students are also named as plaintiffs in the lawsuit, the latest volley in a frenzied legal struggle between teachers and the leadership of the troubled state-run school district… Recent inspections of schools by city workers have uncovered numerous code violations including issues with mold, rodents, broken glass, and leaking roofs.  The lawsuit said district officials, including Earley, have allowed the condition of the schools to ‘deteriorate to the point of crisis’….” Mitchell adds that Darnell Earley, Detroit Public Schools’ current emergency fiscal manager—and previously the state emergency manager involved with Flint’s water poisoning—has turned (unsuccessfully) to the courts to try to prevent protests by teachers.  Now the teachers’ union is turning to the courts to demand that the state eliminate conditions that violate established building codes. We will have to watch to see if the courts can correct the overreach of the executive and legislative branches of Michigan’s government.

Jared Bernstein—formerly an economic adviser to Vice President Joe Biden and before that on staff at the Economic Policy Institute, and currently on staff at the Washington, D.C. Center on Budget and Policy Priorities—tries to help us put Michigan’s governance crisis in perspective: “I’m a hard-boiled policy wonk who’s been around the block enough times that I see little that surprises or shocks me.  But the recently publicized water crisis in Flint, Mich., did both.  The depth of government failure, the neglect and mistreatment of an already deeply vulnerable population, the potentially permanent damage to children’s brains, and the series of events that led to this tragic debacle, must be carefully examined for at least two reasons.  First, the fact that the richest economy on the globe failed to provide an essential public good is a symptom of government failure with which we must reckon.  Second such failure is not a benign accident.  It’s not a passive failure of lazy oversight.  It is a strategy to first break and then discredit the public sector, to undermine trust and inculcate disgust.  The beneficiaries of this strategy are the wealthy who will then push for smaller government and tax cuts.  Those who pay the price will be the people much like those in Flint.  And there are many more of the latter than the former.”

Bernstein describes the strategy of the so-called “corporate” reformers: “(W)e must recognize that government failure is not an accident.  It is a strategy of those who benefit from less government.”  “Fiscal cliffs, threats to default on the national debt, government shutdowns, the collapse of the budget process, unwillingness to compromise, ignoring facts and science that challenge ideology, and of course, as in Flint, the failure to provide basic public goods—all of these can make people say one of two things: 1) ‘the government is a corrupt mess with which I want nothing to do,’ or 2) ‘we cannot have a fair economy or decent society without a well functioning government.  So let’s get to work to make that happen.’  The problem with #1, of course, is that it denies the uncontroversial recognition that quality public goods are a hallmark of an advanced economy…. The problem with #2 is it is not clear how to ‘make that happen.'”

How does this all derive from our growing plutocracy?  Bernstein explains: “It is particularly hard to defend a functioning public sector when the concentration of wealth interacts with our uniquely money-fueled politics and policy.  Forty percent of the wealth in this country is held by the top 1 percent of households, and political science has clearly shown that politics favors their preferences and protects their wealth… Meanwhile, 42 percent of Flint residents are poor, compared to 17 percent for the state of Michigan… Racism is also in play: 57 percent of Flint residents are black, compared to 14 percent statewide… There are a lot more people who need a functioning government than exist in the top 1 percent.”

Michigan’s governor Rick Snyder has tried to diffuse responsibility by doing just what Bernstein describes: discrediting government at all levels—federal, state, and local.  In The Flint Disaster is Rick Snyder’s Fault, the Washington Post‘s Dana Milbank explains why we should not accept Governor Snyder’s attempt to convince us that, in Bernstein’s words, “government at all levels is a corrupt mess with which I want nothing to do.”  Milbank pins the blame on Snyder himself and on his philosophy of governing:

“(T)he Flint disaster, three years in the making, is not a failure of government generally.  It’s the failure of a specific governing philosophy: (Governor) Snyder’s belief that government works better if run more like a business… The governor, former head of Gateway computers, was first elected as part of the tea party wave of 2010 with a plan to use his tech industry skills to run Michigan. He spoke of ‘outcomes’ and ‘deliverables,’ called residents ‘customers’ and sought to ‘reinvent’ the state to make it business-friendly.  A centerpiece of Snyder’s agenda, and one of his first actions, was a new law that gave the state dramatic powers to take over failing municipalities and school districts by appointing emergency managers with unchecked authority.  Michigan voters killed that law in a November 2012 referendum, but a month later Snyder got the legislature, in a lame-duck session, to enact a law very similar to the one voters had rejected. This time legislators attached it to a spending bill so it couldn’t be undone by referendum.  The unelected viceroys had mandates to improve municipal finances but little incentive to weigh other considerations… Snyder undertook an arrogant public policy experiment, underpinned by the ideological assumption that the ‘experience set’ of corporate-style managers was superior to the checks and balances of democracy.  This is why Flint happened.”

A huge question as we move into February will be whether the stories of Flint’s water and Detroit’s public schools will just slip to the back pages of the paper and then out of the news altogether.  Or will we continue to pay attention to their meaning? Flint’s water-poisoning catastrophe and the deplorable deterioration of the Detroit Public Schools are evidence that our politics have dangerously veered away from the principles we learned in basic civics.

If you haven’t read Nobel Prize winning economist Paul Krugman’s important piece on Michigan from last week, check out Michigan’s Great Stink.  (This blog explored Krugman’s important piece here, and recently covered the problem of the loss of democratic governance in Michigan here, here and here.)

Democracy in Michigan Has Been Poisoned Along with Flint’s Drinking Water

The problem in Flint, Michigan that now has a lead-poisoned water system; and in Highland Park, Michigan where the for-profit Leona Group, a charter management organization, was brought in by a state-appointed emergency manager to run the public schools but went broke instead; and in Muskegon Heights, Michigan, where the for-profit Mosaica Education, a charter management organization, was brought in by a state-appointed emergency manager to run the public schools but went broke instead, is that Michigan’s poorest cities and school districts can, under a 2012 law, be taken over by the state and operated by an emergency fiscal manager appointed by the governor. And the current governor does not have a background in public service, reports Amber Phillips of  the Washington Post: “Michigan Gov. Rick Snyder (R), (was) a tech venture capitalist who was elected in 2010 on a platform to fix the state’s ‘disaster’ economy….”

Claire Groden, writing for Fortune, explains Michigan’s abrogation of democracy under the current governor: “(A)t the time that Flint flipped the switch in April 2014 to send the river’s highly corrosive water through lead pipes, the predominantly African-American city didn’t have a working local government… Five years ago Snyder signed legislation that expanded the reasons why the state could choose to appoint a municipal emergency manager, then granted those appointees almost complete power over their assigned municipalities. Under Public Act 4, as it was called, state-appointed emergency managers could break collective bargaining agreements, fire elected officials and determine their salaries, and privatize or sell public assets… Emergency management is a way to short-circuit democracy when a city faces financial insolvency, with the idea that a leader free from accountability to voters can make unpopular but necessary decisions.  But Michigan voters rejected that law in a state-wide referendum… A month later, the state legislature passed a replacement law that made minor adjustments and one major one: an appropriation banning a referendum on the new law.  That was 2012.  By 2013, six Michigan cities—and almost half of the state’s African-American population—were under emergency management.  In many of these cities, public services were pared down to the minimum.  Pontiac’s emergency manager whittled the city’s employees to around 10% of their previous number.” (Here is what happened in Pontiac.)

State emergency managers can override not only elected city councils but also be imposed on public school districts where they can overrule the elected local school board.  In Detroit, where the schools have been operated by an emergency fiscal manager for some years, neither have the bills been paid, nor have required contributions been made to the state teachers’ pension fund, nor have the school buildings been maintained, nor has class size been controlled.  Even the finances—the specific thing emergency fiscal managers are supposed to take care of—have been mismanaged. Short-term borrowing has been regularly turned into long-term obligations that now total $3.5 billion.

Emergency managers in Michigan are limited to terms of 18 months under the 2012 law, which might curtail the damage any one of them could possibly impose, but Governor Rick Snyder has found a way to skirt that provision of the law.  After an emergency manager has served for 17 months and twenty-nine days, that manager resigns and another is appointed.  Snyder has continued to shuffle around the same people.  Darnell Earley, the emergency manager responsible for the lead poisoning of Flint’s water, is currently serving as the emergency manager of the Detroit Public Schools.

Here is a review from yesterday’s NY Times of what happened in Flint: “From 2011 to 2015, Flint was in state receivership…. Flint, led at the time by an emergency manager who was appointed by the state to help solve the city’s fiscal woes, switched water supplies in April 2014—in part to save money, which… amounted to $1 million to $2 million a year.” State agencies repeatedly lied about the poisoning of Flint’s water, but local leaders lacked the power to expose the statewide cover-up, and the children continued to drink contaminated water.  The ultimate result has neither saved Flint nor the state of Michigan any money. The Washington Post’s Phillips reports: “In October, the state paid $12 million to switch Flint back to Detroit’s water system.”  Unfortunately the failure over a period of many months to add anti-corrosives to the water leaves the system vulnerable to the continued leaching of lead into the water even after the switch back to Detroit’s system.

Austerity, not structural reform, has been the operating model for the emergency managers in Michigan’s poor cities and school districts.  Fortune‘s Claire Groden explains: “Critics of the emergency manager law have long protested that the appointees cut services to realize short-term savings, with little eye to the long-term structural problems the cities face. ‘ The assertion is that these are cities that are running deficits because the elected governments are not capable of keeping spending under control.  The problem from my perspecteive is that these really are structural deficits… it’s almost impossible for anyone to solve these problems,’  says Peter Hammer, a law professor at Wayne State University…. Structural problems like the fact that 40% of Flint’s residents live in poverty—presenting an impossible tax base for the city to draw upon—go unanswered.”

Yesterday, Julie Bosman reported for the NY Times on the impact of years’ of emergency management of Detroit’s schools, where the teachers have been staging rolling sick-outs to try to bring attention to the conditions in the buildings where they work: “Detroit’s public schools are a daily shock to the senses, run down after years of neglect and mismanagement, while failing academically and teetering on the edge of financial collapse.  On Wednesday, teachers again protested the conditions, calling in sick en masse and forcing a shutdown of most of the city’s almost 100 schools… Things have become so bad, district officials say, that the Detroit public school system could be insolvent by April.”

The stories of Michigan’s poorest cities and school districts demonstrate our society’s willingness to impose austerity instead of addressing our collective failure through federal and state government to provide financial support when local communities and school districts, segregated by race and poverty, utterly lack the capacity to fund essential services. We are further willing to disenfranchise and disempower the citizens of these cities and school districts by destroying the democratic institutions designed to protect their votes and their voices.

Will Michigan find a way to restore democracy for its poorest citizens?

In a commentary published on Monday in the Detroit Free Press, Kary Moss, executive director of ACLU of Michigan, presses for the repeal of Michigan’s law that grants the governor power to impose appointed overseers on Michigan’s poorest cities and school districts: “Little has been said… about… a law that gives a political appointee unfettered power to make decisions that will affect a community, without democratic accountability.  This lack of checks and balances on government is a civil rights issue.  The law does not require that an emergency manager have any expertise outside the financial arena and, to that end, allowed him (in Flint) to elevate the financial bottom line above all else. It enabled a revolving door of emergency managers in Flint with no ties to that community and yet unfettered power to make decisions that affect them.”

This blog has covered the theft of democracy by Michigan’s emergency fiscal managers two other times this week, here and here.

Will Flint’s Lead Poisoning Wake Us Up to Disaster of State Takeovers and Austerity Budgets?

State takeovers of various sorts have been a favorite policy response of governors and state legislatures who seek an efficient solution to the problems of America’s poorest cities and school districts.  The question today is whether the lead poisoning of Flint, Michigan’s water supply and the attempt for months to hide the seriousness of this situation, all under Emergency Manager Darnell Earley—now serving as Emergency Manager of the Detroit Public Schools—will sufficiently awaken the public to the widespread neglect by state governments of so many of our poorest cities and school districts.

Last August, the Alliance to Reclaim Our Schools released a major report, Out of Control: The Systematic Disenfranchisement of African American and Latino Communities Through School Takeovers, that traces the state takeovers of school districts and the abrogation of democracy as appointed state overseers commence to manage operations without the usual checks and balances imposed by elected boards of education.  That report describes the long-running New Jersey takeovers of Jersey City (since 1989), Paterson (since 1991), and Newark (since 1995); the Louisiana Recovery District that has fully charterized the New Orleans schools since Hurricane Katrina in 2005; the Tennessee Achievement School District that operates schools in Memphis and now in Nashville; the Michigan Education Achievement Authority by which Governor Rick Snyder has taken over 15 schools in Detroit since 2013; and two new state takeovers in 2015—the takeover of Milwaukee Schools that was logrolled last summer into the Wisconsin state budget, and Arkansas’ takeover of the schools in Little Rock.  The 2015 legislation to enable Ohio to take over Youngstown’s schools was too recent to have been covered in the report, and Nathan Deal’s proposal for a Georgia “Opportunity School District” has passed the legislature but must be affirmed by voters in a referendum in November, 2016.

Additionally, Michigan Governor Rick Snyder has the power to appoint emergency fiscal managers for municipalities and school districts deemed to be in financial emergency.  Emergency fiscal managers were first authorized by state law in Michigan in 1988.  In a referendum in November of 2012, the voters overturned the right of the governor to take over local municipal and school district juristictions deemed to be in financial emergency, but the all-Republican legislature came back with a tougher law that was passed before the end of that year. The 2012 law supposedly limits the tenure of austerity-budget emergency managers, but Governor Snyder has found a way to extend emergency management long-term.  Curt Guyette, an investigative reporter for the ACLU of Michigan explains: “(T)he managers were given extreme unchecked authority… (T)hey were given the ability to come in, clean up the problems and get out.  And so there was an 18-month time limit put on their terms.  Except that this governor is exploiting what amounts to a loophole in that law… (T)hese emergency managers serve for 17 months and 29 days, and the day before their term expires, they resign.  A new emergency manager is put in place, and the clock starts ticking all over again.  And they just shuffle them from one place to another.”

We now know that a couple of years ago, Michigan’s appointed emergency fiscal manager, Darnell Earley, approved a plan for Flint to save money by creating its own water system instead of buying already treated water from Detroit.  Chemicals to prevent release of lead from old, corroded pipes were not added to the water when Flint began taking water from the Flint River; the pipes corroded all over town; and the children of Flint began to experience epidemic lead poisoning.

Earley left Flint and was appointed Emergency Manager of the Detroit City Schools a year ago, not enough time for him to be blamed for all of the school district’s fiscal problems.  The state’s previous appointed emergency managers had already failed to correct a long-running financial crisis for Detroit’s schools, a crisis that has now culminated in the failure to pay required contributions into the state teachers’ pension fund and a practice of restructuring short term debt instead of making the needed payments.  Detroit City Schools currently have an accrued deficit of $3.5 billion.

Here is the conclusion of the new report from the Citizens Research Council of Michigan: “Detroit Public Schools has $3.5 billion in outstanding debt.  Nearly half of this amount, $1.67 billion, is capital liabilities payable with a dedicated millage… The balance of DPS’s liabilities are related to legacy costs and repaying short-term borrowings converted to long-term debt by state-appointed emergency managers.  This includes $1.3 billion that represents DPS’s estimated share of the unfunded actuarial accrued liabilities for retiree pension and health care costs…. A plan that solves the district’s money problems without addressing what is taking place in the classroom will not set the district up for future success.  Similarly, any financial plan that only deals with the district’s near-term fiscal woes (cash flow for example) will not prove lasting and will not support student learning over the long haul if current financial problems are shifted to future students.”  Neither has the state legislature invested in public education, nor has the state devised a workable plan for equitable distribution of funding to help the school districts with the least capacity to generate local revenue. A new report from the Center on Budget and Policy Priorities documents that Michigan’s general state funding per student remains 7.5 percent lower than it was prior to the 2008 recession.

It is not only the emergency fiscal managers whose performance is in question in Michigan, but critics have also been raising very troubling questions about the other form of state takeover in that state, the Education Achievement Authority, that manages 15 of Detroit’s struggling schools. Michigan’s Education Achievement Authority was intended to have been expanded beyond Detroit, but low achievement and other problems have prevented its growth. Here is some troubling data released in mid-December: “Just one fourth-grader in schools run by the Education Achievement Authority—a state district created to turn around the worst performing schools in the state—passed the math portion of the exam…. Overall, only 1.2% of the students in the district passed in math and 5.6% passed in English language arts.  In some grades and subjects, not one student passed.”  Last spring, even Governor Snyder admitted to the failure of the Education Achievement Authority, when he issued an executive order to transfer the Education Achievement Authority from the Department of Education to the Department of Technology, Management and Budget, a department directly under Snyder’s control.  In his executive order, he declared, “Despite not achieving satisfactory outcomes, the current structure has neither implemented the rigorous supports and processes needed to create positive academic outcomes….”  In these words last March, Snyder condemns the results of the state takeover initiative he had himself created, though the test scores just released show no improvement under the new management plan he instituted last spring.

And there is more, this time about the implications of the state-imposed emergency fiscal manager on the Detroit Public Schools—news about cutting back on building maintenance under current Emergency Fiscal Manager Darnell Earley.  Here is Michigan’s Eclectablog: “Darnell Earley has been the Emergency Manager for DPS for a year now.  While the obscene state of many DPS schools is not solely on his shoulders, it’s clear that that he’s done nothing to solve the problems.  Once again, he has used the Emergency Managers’ toolkit of cutting, reductions, and other austerity measures to solve a problem that can only be resolved through investment and renewal… For months, labor unions and residents have been sounding the alarm that a plan by DPS to cut the number of certified, licensed boiler operators and switch to an untested, unmanned system of monitoring commercial boilers in schools is too dangerous.  Boilers are more likely to explode when not maintained and watched by licensed, certified operators… DPS is decreasing the number of operators from one per school to a one per every five schools… Getting to a school in time to avert an equipment failure that can cause an explosion will become almost impossible.”

Here is the analysis of Curt Guyette,  speaking in an interview with Democracy Now: “(O)ne of the things about the emergency manager law is that these managers were given extreme unchecked authority.  And the thinking was… they were given the ability to come in, clean up the problems and get out…  And the other thing is… the imposition of austerity.  This is what austerity looks like… So you have all the problems in these schools that you just reported on, because they’re treating it like a managerial problem rather than a structural problem.”  Guyette is asked to comment on the type of communities and school districts on which Michigan has imposed emergency fiscal managers: “With the exception of one, they are all majority African American.  And they’re also all very poor cities.  So this is a racial issue, and it’s a class issue.”

This blog recently covered the fiscal problems of Detroit Public Schools here.