Local government financial emergencies legislation in Florida: definitions and reporting responsibilities.

• Author: Adams, Damon R.

A task force convened by the Florida Government Finance Officers Association at the request of the governor's office points the way for improving the process of determining emergencies.

In 1979, the Florida legislature adopted a local government financial emergencies statute ([section]218.503). This legislation, one of the most specific of its kind in the nation, was developed not because of any local government financial emergency existing or threatened in Florida but in response to the problems of New York City, Cleveland, and other cities that were then in the midst of or had recently experienced a severe financial emergency. Since the statute has been in place, two major local governments - the City of Miami and Escambia County - have required state intervention, and the provisions of the act have been employed effectively in several smaller governments.

Municipal governments in Florida enjoy broad home-rule powers: they have the responsibility and authority to determine services, set service levels, and provide for the funding of such services. The financial emergencies statute, recognizing this relationship, does not provide for the removal of municipal government responsibility in an identified financial emergency. The state's role, rather, is to insure that local governments take the appropriate steps to eliminate the financial emergency. It is difficult for the state to step in before problems become emergencies and not seriously erode home-rule authority.

Nationwide attention was drawn to the City of Miami in late 1996 when the city declared itself in a state of financial emergency pursuant to Florida statute. The enhanced media attention soon broadened to include other local governments in Florida that also might be in a state of financial emergency, according to the provisions of the statute. Auditor general reports filed with the governor's office indicated that the audit reports of 42 local government entities showed that they either were or might be considered in a state of financial emergency. Most of these governments learned through the national media that they were on the list.

Reporting Responsibilities

Florida's financial emergency statute establishes criteria for the determination of financial emergency for local governmental entities. The primary responsibility for reporting under this statute rests with officials of the local governmental entity experiencing or about to experience a financial emergency, as defined by the criteria, if action is not taken to assist that government. The local government is required to make this notification to the governor and the Legislative Auditing Committee.

The next level of reporting responsibility is placed with the independent auditors of the government entities. Pursuant to the rules of the auditor general, the auditors must state in their management letter whether or not the local government that they are auditing meets any of the financial emergency criteria.

The auditor general, after reviewing the audited financial statements of local governmental entities, is responsible for notifying the governor and the Legislative Auditing Committee of any government whose report contains a statement by the independent auditor that the government is in a state of financial emergency. The auditor general also provides notification of any entity whose report does not contain sufficient information to resolve fully matters included in the report which indicate that the local governmental entity may be in a state of financial emergency. There is no authorized procedure for requesting clarifying information from the local governments that are on the auditor general's financial emergency list.

When the governor's office has been notified by local government officials or the auditor general that a jurisdiction is in a state of financial emergency, it is then charged with the responsibility of determining what level of state assistance, if any, is needed in resolving the financial emergency.

Determination of Emergency

The determining factors that trigger notification of a financial emergency are defined in the statute as follows.

* Failure to repay short-term loans from banks within the same fiscal year they are due or...