Michigan Treasurer Andy Dillon called for a preliminary review of the City of Detroit's finances. This is the first step towards appointing an emergency manager over the city's finances, which would have special authority to rework collective bargaining agreements, contract out services and sell government assets.
The state may call for a review if the city hits one of fourteen triggers, which includes receiving letters from major vendors complaining that the city’s payments are more than 6 months past due, not filing audit reports with the state on time, or having a long-term debt rating that is too low. A request from the treasurer for which trigger has been pulled has not yet been received, though a Treasury press release cited the city’s failure to plan for eliminating its deficit, using deficit-financing bonds, and bad accounting that risks federal funding.
Any review of Detroit’s finances is likely to find overblown employment benefits. The city expects to spend nearly as much on employment benefits as it does on payroll, with health insurance costs increasing by 62 percent in the past three years and pension costs more-than doubling, according to the Detroit Free Press.
As expected, there are a number of fiscal problems facing a city whose population fell by over 20 percent in a decade. Something ought to be done to bring the city’s benefits into balance, regardless of whether it’s the city’s current management or a state-appointed emergency manager.
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