Emergency Financial Manager Reform Act of 2016

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Emergency Financial Manager Reform 
Act of 2016''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) Local government units are charged with providing 
        critical law enforcement, educational training, public safety, 
        and health services for the communities they serve.
            (2) The mismanagement of Federal grant money, including 
        conflicts of interest and abuse of discretion, undermines the 
        ability of local government units to provide these essential 
        services.
            (3) The U.S. Government Accountability Office found that 
        Federal grant management operations for local government units 
        were adversely impacted in cases where unaccountable emergency 
        financial managers were appointed.
            (4) The Federal Government has a strong interest in 
        preventing the mismanagement of Federal funds intended to 
        support local law enforcement efforts to protect health and 
        safety by ensuring that local government units are accountable 
        for such funds.
            (5) The appointment of an emergency financial manager may 
        adversely impact voting rights when such appointment 
        disproportionately affects minority communities whose local 
        elected officials are displaced by such financial manager.
            (6) The appointment of an emergency financial manager can 
        adversely impact public health and safety priorities, including 
        the safety of public drinking water systems, in instances where 
        they are unaccountable to local elected leaders.
            (7) Under article I, section 10, clause 1 of the U.S. 
        Constitution, a State is prohibited from impairing a 
        contractual obligation. In addition, some State constitutions 
        explicitly prohibit impairment of a collective bargaining 
        agreement and accrued financial benefits under a pension plan 
        or a retirement system. Such impairment is unconstitutional and 
        a violation of law unless consented to by all parties.

SEC. 3. SAFEGUARDS REGARDING STATE APPOINTMENT OF AN EMERGENCY 
              FINANCIAL MANAGER.

    (a) Reduction of Byrne-JAG Funds.--The Attorney General may 
withhold 5 percent of the funds that would otherwise be allocated to a 
State under the program under subpart 1 of part E of title I of the 
Omnibus Crime Control and Safe Streets Act of 1968 (42 U.S.C. 3750 et 
seq.) for the fiscal year following any fiscal year in which an 
emergency financial manager is appointed by that State or continues in 
a previous appointment and--
            (1) the chief legal officer or other appropriate State 
        official does not, by the date of the appointment and every 18 
        months thereafter while the appointment remains in effect, 
        submit to the Attorney General a certification that--
                    (A) such appointment does not have the purpose nor 
                will it have the effect of denying, abridging, or 
                diluting the right to vote on account of race or color; 
                and
                    (B) the community for which the emergency financial 
                manager is appointed has been given an opportunity, by 
                public notice issued simultaneously with the submission 
                to the Attorney General, to submit comments in full for 
                a period of at least 30 days with regard to 
                subparagraph (A);
            (2) the Attorney General interposes an objection under 
        paragraph (1)(A) by not later than 60 days after submission of 
        comments under paragraph (1)(B) and the emergency financial 
        manager thereafter continues in the appointment;
            (3) such emergency financial manager is authorized to make 
        decisions affecting public health or safety of the residents or 
        employees of a local government unit, including the 
        disbursement of any emergency funds provided by any Federal or 
        State entity for the purpose of addressing lead or other 
        contamination of drinking water in a public water system, 
        without receiving prior approval from the governor of the State 
        and appropriate local elected officials;
            (4) such emergency financial manager does not have adequate 
        oversight in effect to ensure against conflicts of interest, 
        mismanagement, and abuse of discretion by such emergency 
        financial manager;
            (5) such emergency financial manager is authorized to 
        reject, modify, or terminate one or more terms and conditions 
        of an existing collective bargaining agreement without mutual 
        consent as to such rejection, modification, or termination by 
        all parties to the agreement;
            (6) such emergency financial manager is authorized to 
        reject, modify, or terminate one or more terms of an existing 
        contract without mutual consent by all parties to the contract 
        or without submitting such rejection, modification, or 
        termination for approval by a bankruptcy court under title 11, 
        United States Code; or
            (7) such emergency financial manager is appointed and 
        members of the community under the jurisdiction of such 
        appointment were not provided prior thereto--
                    (A) an opportunity, by public notice issued 
                simultaneously with the submission to the Attorney 
                General required pursuant to paragraph (1) for a period 
                of at least 30 days, to make public comment as to any 
                conflicts of interest the proposed appointee may have, 
                whether the proposed appointee has the requisite 
                experience and financial acumen, and whether the 
                proposed appointee is empowered to propose sources of 
                financial assistance, such as loans, grants, and 
                revenue sharing; and
                    (B) with the name of a State official to whom may 
                be conveyed complaints about the appointee, including 
                complaints about any conflicts of interest, 
                mismanagement, or dereliction of duty.
    (b) Reallocation.--Amounts not allocated under the program referred 
to in subsection (a) to a State shall, to the extent practicable, be 
reallocated under that program to the local government unit for which 
the emergency financial manager is appointed.

SEC. 4. DEFINITIONS.

    In this Act:
            (1) The term ``emergency financial manager'' means any 
        person appointed by a State, including a financial control 
        board or commission, emergency manager, receiver, coordinator, 
        or overseer that oversees or manages a local government unit.
            (2) The term ``local government unit'' includes cities, 
        towns, municipalities, school board districts, law enforcement 
        departments or any other body, department, or office which 
        exercises authority over matters of local concern at the 
        direction of local elected officials or governing bodies or the 
        appointees of local elected officials or governing bodies.
            (3) The term ``adequate oversight'' means, in the case of 
        an emergency financial manager--
                    (A) a monthly, publically available report, 
                reviewed and approved by the governor and appropriate 
                local elected officials, accounting for all financial 
                activities of the emergency financial manager 
                (including possible conflicts of interest, 
                mismanagement, and abuses of discretion) related to the 
                duties of the emergency financial manager; and
                    (B) an independent State-approved publically 
                available audit of the emergency financial manager's 
                duty-related activities on an annual basis or, if the 
                term of an emergency financial manager is less than one 
                year, at least one such audit.
            (4) The term ``State'' means any one of the several States.

Summary: Emergency Financial Manager Reform Act of 2016 This bill requires a state with a state-appointed emergency financial manager to certify that the appointment: (1) does not have the purpose or effect of limiting the right to vote on account of race or color, and (2) followed a notice and comment period. If a state with a state-appointed emergency financial manager fails to submit such certification, then the Department of Justice may reduce by 5% that state's allocation of funds under the Edward Byrne Memorial Justice Assistance Grant program.