Detroit’s “Grand Bargain:” The Role of Philanthropy in Tough Budget Times

Source: Emily Rosenman, PA Times, Vol 5 no. 2, Summer 2019
(subscription required)

In 2014, the City of Detroit closed the largest municipal bankruptcy deal in U.S. history. Referred to as the “Grand Bargain,” it may set a precedent for the role of philanthropic foundations in society. Other cities with dauntingly large unfunded pension liabilities—like Chicago and Philadelphia—should take note of the Detroit experience, especially as the nonprofit sector takes on a larger role in city governance with the advent of public sector austerity. …. The Grand Bargain is a unique illustration of one way philanthropic foundations are taking an increasingly visible role in policy leadership and public finance in post-recession jurisdictions, as well as with cities facing economic distress, unemployment, population loss, distressed property values, declines in state revenue sharing and pension crises. ….

….It is worth noting that many cities face budget holes in part because of depleted tax rolls. Meanwhile, philanthropic foundations exist and are thriving in part because of tax deductions that enable those charitable contributions. Further, the same philanthropic actors that bailed out the City of Detroit are not at all accountable to the city’s voters, an additional layer of complication….