News Story

Interlocal Agreements – Good Intent, Bad Practice

Some 40,000 private day care owners and providers in Michigan are transformed overnight into public employee union members.

Ditto for another 60,000 private home care workers.

And yet another organization gets to play in the sand on the taxpayers’ dime.

All of these became possible because of an innocuous and arguably well-intended law that’s been on the books for more than 40 years.

The Urban Cooperation Act of 1967 allows two or more units of government to create so called “Interlocal Agreements” (ILAs). Under these agreements, local governmental entities can join forces on services such as public safety, transportation and water usage, without having to jump through big bureaucratic hoops or bog down the Legislature for approval. For instance, a 1985 Interlocal agreement between five communities in Washtenaw County formed the Dexter Area Fire Department. In 1990, four Saginaw County municipalities signed an interlocal agreement to form the Joint Sanitary Sewer Agreement. And 16 counties in the northern portion of Michigan’s Lower Peninsula signed a Reciprocal Law Enforcement Aid Agreement in 1994. Many would argue such services are closer to a core function of government and at the very least such cooperation among governmental units should be encouraged for cost-savings on behalf of taxpayers.

There are, to date, 999 ILAs on file with the Michigan Secretary of State. A Mackinac Center review of these ILAs found several eyebrow-raising trends in not only the sheer growth in number of these agreements, but even more disturbing, in the ways ILAs have recently been used.

Here are the numbers:  

There were just three interlocal agreements signed prior to 1970.

From 1970 to 1979, Michigan municipalities had formed 37 ILAs.

From 1980 to 1989 there were 108 more ILAs.

From 1990 to 1999, 121 were created.

From 2000 to present, 727 new interlocal agreements were created; 91 so far in 2011…

The rate of increase may be due in part to the fact that ILAs are no longer used for the sole purpose of facilitating so-called “core functions” of government.

For example, 58 ILAs involve the Michigan Economic Development Corporation which itself is a product of an interlocal agreement between the Michigan Strategic Fund and “Participating Public Agencies”:

“As a public corporation created through an interlocal agreement between state and local governments, the MEDC is a liaison with local communities and agencies across the state.”

But the MEDC does not provide public services like safety or trash collection. Instead, it is a quasi-governmental unit that dishes out tax breaks and subsidies to select industries and businesses. There are many who would argue that no form of government should be in the business of selecting winners and losers in the market, much less a tangential form of government like the MEDC.

ILAs have also been twisted in such devious ways that private residents became government employee union members without either their knowledge or approval and without permission or any involvement by the Legislature as spelled out in the state’s constitution (Art. 4, Sec. 48)

The Michigan Quality Community Care Council (MQC3) is the product of an interlocal agreement between the Michigan Department of Community Health and the Tri-County Aging Consortium. Created in 2004, the MQC3 touts on its website that it “offers a tool for finding, choosing, and hiring a Provider.” What’s not mentioned, is the existence of the MQC3 also provided a so-called public “employer” for the SEIU to create the 55,000 member SEIU Healthcare Michigan. The SEIU takes union dues from the Medicaid subsidies paid to home care workers (as well as registered nurses, nursing home aides and hospital support staff) and amounts to as much as $6 million a year.

The Michigan Home-Based Child Care Council (MHBCCC) was another such interlocal agreement, formed by the Michigan Department of Human Services and Mott Community College. Its purported reason for existing was “to improve the quality of home-based child care in Michigan.” Like the MQC3, the MHBCCC provided an “employer” for another 40,000+ business owners and independent contractors who are now members of the government employee union called Child Care Providers Together –Michigan, a joint effort by the UAW and AFSCME. These union dues were skimmed from a federal day care subsidy grant to the state, and netted the union more than $4 million from Jan. 1, 2009 to Sept. 30, 2010.

At least one ILA has created what appears to be an avenue for taxpayer-funded lobbying. In 2005, the Michigan Department of Human Services (at that time it was called the Family Independence Agency) began creating interlocal agreements with Intermediate School Districts around the state to form the Early Childhood Investment Corporation (ECIC). The ECIC boasts of its efforts to coordinate the state’s school readiness program through its Great Start System.  

The ECIC is funded by the Child Care and Development Fund (the same money that subsidizes day care providers). But much of its activity seems to focus on events that aim to get legislators’ attention, such as the ECIC’s Sandbox Party initiative, which “asks our candidates and policy makers to demonstrate that infants and young children are a priority…”. 

The purposes of these last three examples are a stretch from the spirit of the law under which they were created, given that they also do not improve any core government services. 

Fortunately, due to the Mackinac Center Legal Foundation’s lawsuit against the DHS over the illegal withholding of union dues from private day care providers’ subsidy checks and the resulting public attention, Michigan Gov. Rick Snyder effectively ordered the dissolution of the MHBCCC interlocal agreement.

So make that ILA total 998. 

And that total could soon be 997. According to a March 7, 2011, MIRS article (subscription only), “The Gov. Rick SNYDER administration will get rid of the Michigan Quality Community Care Council (MQCCC).”

Interlocal agreements could also see some legislative treatment. Michigan Sen. John Proos, R-St. Joseph, last year recognized the misuse of ILAs to assist in these stealth unionization schemes. He told the Mackinac Center that these “few very egregious, over the top examples of how interlocal agreements have abused what are, in essence, a really good idea.”

As a member of the Michigan House in 2010, Proos introduced House Resolution 270.  The resolution would have urged the Michigan Attorney General to take steps to beef up scrutiny of interlocal governmental agreements, and require any ILAs in the state have biennial audits conducted by the Auditor General and be reauthorized by the governor.

Though the resolution went no further than committee, Sen. Proos says he’s not finished with this issue. He told the Mackinac Center at the start of the current legislative session, “I’ve proposed a series of solutions to that, not the least of which is let’s leave it at the foot of the governor whether it be democrat or republican to be responsible for those interlocal agreements and to verify their efficacy and to verify whether or not they’re legal and appropriate each and every year. I would hope that we would move that legislation quickly.”

There may be hundreds of examples in which most entities are serving the people and doing what the Urban Cooperation Act of 1967 intended. But there are tens of thousands of reasons why the residents of Michigan should be on high alert when new ILAs are formed that do more than the basic functions of government without going before voters or legislators and are subject to little or no direct accountability. Just ask the formerly unionized home day care owners and providers and their currently unionized counterparts who happen to get federal aid for taking care of loved ones in their own homes.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.