The Pension Grand Bargain: A New Reform Model for Cities
In 2013, as Detroit’s crippling overhang of retiree pension-payment obligations hung over its bankruptcy negotiations, a daring move by a dozen major foundations broke the logjam: led by a $125 million pledge by the Ford Foundation, the philanthropic consortium collectively pledged $366 million toward the city’s pension liability, on the proviso that their contributions would leverage contributions from private corporations, state government, and public-employee unions. This paper examines whether a Detroit-style grand bargain could be successfully applied to four other midwestern cities facing the dangerous combination of significant pension costs and curtailed city services: Buffalo, Chicago, Cleveland, and St. Louis.
- Buffalo, Chicago, Cleveland, and St. Louis have pension liabilities similar to, or greater than, those in pre-bankruptcy Detroit—liabilities that threaten the provision of core city services.
- Like Detroit, these cities also have robust local philanthropic communities, as well as high levels of household poverty and stagnant property-tax revenues.
- Philanthropic assets in Buffalo, Chicago, Cleveland, and St. Louis are more than sufficient to support a Detroit-style grand bargain—if paired with contributions proportionally equivalent to those made by other Detroit stakeholders (corporations, government, and labor)—to reduce such cities’ pension debt, as well as to improve municipal services and/or reduce taxes.