By Karen Pierog
Jan 18 (Reuters) - The Michigan Supreme Court on Friday
rejected a challenge to the state's emergency manager law that
deals with financially strapped cities and school districts.
The ruling may lift any prospective legal cloud over action
that Michigan Governor Rick Snyder could take in the near future
to use the law to appoint a manager for Detroit. An emergency
manager could recommend the city file for bankruptcy.
The Supreme Court let stand a ruling by a Michigan Appeals
Court that allowed the law on emergency managers stay in place.
"We are not persuaded that the questions presented should be
reviewed by this court," the Supreme Court said in its ruling.
A review team appointed by Snyder in December to review
Detroit's finances could recommend the appointment of an
emergency financial manager. The team's work continues with no
particular timetable for its conclusion, Terry Stanton, a
spokesman for the Michigan Treasury Department, said on Friday.
The state's law on emergency managers, known as Public Act
72, was resurrected last by Michigan officials when a law that
had replaced it, Public Act 4, was placed on the ballot and
repealed by Michigan voters in November.
Both laws allowed for Michigan to intervene in financially
troubled local governments and to appoint emergency managers.
After Public Act 4 was suspended in August, the state used
Public Act 72 to reappoint emergency managers running cities and
A lawsuit by a community activist, Robert Davis, sought to
oust the emergency manager running the Detroit Public Schools on
the argument that Public Act 72 no longer existed.
In November, a Michigan Appeals Court panel ruled that when
voters rejected Public Act 4, they also rejected the legislative
repeal of Public Act 72, allowing that measure to remain in
Davis had appealed to overturn that ruling. Andrew Paterson,
Davis' attorney, was not immediately available for comment.
Meanwhile, Snyder last month signed into law a bill passed
by the Republican-controlled legislature that gives local
governments options for dealing with fiscal stress. That law,
which will replace Public Act 72 and will keep in place existing
emergency managers and consent agreements, does not take effect
Under the new law, governments will choose between Chapter 9
municipal bankruptcy if the move is approved by the governor, an
emergency manager, arbitration with a neutral party, or a
consent agreement laying out terms for fixing the government's
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