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Michigan governor defends government takeover law

DETROIT (Reuters) - Michigan Governor Rick Snyder used his state of the state address on Wednesday to defend a controversial law that makes it easier for the state to intervene in financially troubled local governments and school districts.

"Think about a situation where employees are not going to get their paychecks, suppliers are not getting paid, bond payments are not getting made, financial statements cannot be completed," the Republican governor said in his speech to the state legislature. "These are critical problems the new law is helping."

Under the law passed in 2011, emergency managers appointed by the governor to run governments with extreme fiscal problems have the power to void contracts and collective bargaining agreements. Four cities and the Detroit Public Schools are currently being run by state-appointed managers, while a review team appointed by Snyder began work this month scrutinizing the finances of Detroit -- Michigan's largest city and a potential candidate to get an emergency manager.

Snyder did not address a potential takeover of Detroit directly in his speech, saying the state stood ready as a "supportive partner" to help fiscally stressed governments.

"It's important for all Michiganders to understand having a thriving, growing Detroit is critical to all of us," he said after introducing the city's mayor, Dave Bing, in the audience. "Detroit has many exciting developments going on and resolving the city's financial challenges would clear the path to a bright future."

Earlier on Wednesday, Bing told Reuters that Detroit, which is trying to cut its burgeoning employee pension and healthcare costs, was close to an agreement with the American Federation of State, County and Municipal Employees, the biggest of its 48 unions, and was making progress with police and fire unions.

"I believe we will hit my target of getting agreements by the end of the month," Bing said.

The mayor and other city officials are scrambling to address the city's fiscal woes to avoid a potential recommendation by the state review team that Detroit should be run by an emergency manager.

The constitutionality of the emergency manager law is being challenged in court, while a petition drive has been launched to place a repeal of the law on the November 2012 statewide ballot.

(Reporting By Karen Pierog; Editing by Gary Hill)

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