INDIANAPOLIS | Gov. Mitch Daniels supports the plan of a Valparaiso state senator allowing local governments to ask for a state takeover and, if necessary, declare bankruptcy.
"We need it. I hope that we're not going to see many of those but we need to have this law clarified and on standby," Daniels said Monday.
State Sen. Ed Charbonneau, R-Valparaiso, is sponsor of Senate Bill 105, which would allow a local government meeting one of eight "distressed" financial criteria to ask the Indiana Distressed Unit Appeals Board to appoint an "emergency manager" to run the government with the powers of both the executive and council.
Under the measure, the emergency manager would have the authority to cut the budget; renegotiate labor contracts; and approve or veto contracts, expenses, loans and hiring, among other powers.
"It allows for the prompt reorganization under some auspices so that services to citizens, at least the most vital services, aren't interrupted," Daniels said.
If the emergency manager was unable to turn the local government around, the unit would be allowed to seek federal bankruptcy protection, according to the legislation. State law currently doesn't allow Indiana governments to declare bankruptcy.
The Republican governor said experts project an increasing number of local governments facing insurmountable budget deficits will enter bankruptcy in 2011.
"I hope it's not in Indiana," Daniels said. "We just need to be prepared in case someday there's one on our hands."
In recent audits, the State Board of Accounts has questioned the abilities of Gary and Lake Station to "continue as a going concern" due to continued high city spending despite significantly reduced city revenues due to property tax caps.