News Story

Commentary: Former State Treasurer Diverts Blame for Detroit's Problems

Former State Treasurer Robert Kleine argued in the Detroit Free Press that the state is responsible for sending Detroit into bankruptcy.

That is partially correct, but not for the reasons Kleine listed. As former state treasurer, he had the responsibility of helping city officials prevent and address fiscal stress. State treasurers are responsible for implementing the state's emergency manager law. As such, Kleine was supposed to provide the adult supervision that ensured that local units of government stayed on track.

Despite the city tripping numerous triggers that were supposed to initiate a state review, Klein refused to begin the process. A review team could have declared a financial emergency long before the Detroit became insolvent.

Here are three review team triggers that the city of Detroit pulled:

  • The city used property tax receipts it collected for other governments to alleviate the city's cash flow problems;
  • The city failed to make pension contributions on a timely basis; and
  • The city failed to file audit reports with the state on a timely basis.

It is likely that a review team would have found severe fiscal stress in the city. While the response from the state might have been different under the Granholm administration than the Snyder administration, and the laws governing the emergency manager's powers have changed, it's likely that Detroit would be in much better shape now if it had adopted recommendations.

The Granholm administration did not have great success with emergency financial managers. Her replacement manager in Highland Park currently faces charges for embezzling from the city.

Yet greater state oversight might have done a lot to prevent the corruption of the Kilpatrick administration. And an earlier state consent agreement or emergency financial manager could have set the city on a path to operating sufficiency.

Detroit Emergency Manager Kevyn Orr has a plan to return the city to operating surpluses if payments toward long-term debts are mitigated.

It's possible that he wouldn't have needed bankruptcy protections had the financial emergency started sooner.