Now that a judge has approved Detroit’s philanthropy-backed plan to exit bankruptcy, the question is: Will foundations rescue other debt-ridden cities?
Foundations involved say their actions don’t signal a broader availability of their dollars to cover public debt.
“Philanthropy will not be in the business of bailing out cities,” says Darren Walker, head of the Ford Foundation. “But the work of philanthropy is to problem-solve, and this is an example of how, when we push ourselves, we can find solutions that philanthropy is uniquely suited to provide.”
Singular Event
Dale Thomson, a political scientist at the University of Michigan at Dearborn, says such a government-philanthropic deal is not likely to be repeated elsewhere, chiefly because no other city has such a deep roster of foundations. He noted that foundations have worked with Detroit in the past on strategic economic efforts. The bankruptcy deal “wouldn’t have happened without that extensive collaboration,” says Mr. Thomson.
Tracy Gordon, a senior fellow with the Tax Policy Center of the Urban Institute and Brookings Institution, says Detroit’s deal was the result of an alignment of stars rarely seen in bankruptcy proceedings. “It’s hard to imagine that kind of mobilization of support from the state and local governments and the philanthropy community, particularly in smaller places that are less a part of our national psyche.”
Dangerous Precedent
But William Schambra, director of the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal, notes that Chicago, home to one of the country’s shakiest pension systems, has big grant makers such as the John D. and Catherine T. MacArthur Foundation and the Joyce Foundation.
“If you’re going to save Detroit, why would you not save Chicago under the same circumstances?” he says.
Beth Gazley, an associate professor at Indiana University’s School of Public and Environmental Affairs who studies philanthropic support of government, praised grant makers for helping Detroit, but she worries that governments are increasingly going hat in hand to philanthropy to pay for basic services.
“If philanthropies step up like this, good for them,” Ms. Gazley says. “But if that becomes public policy or the expectation of government that they will step in, then that’s a problem.” She says potential consequences include an erosion of trust in government and an increase in the power of philanthropists, who are not accountable to the voters.