Inquirer Editorial: Lessons from a broke city

Former Detroit Mayor Kwame Kilpatrick in a 2010 mug shot.
Former Detroit Mayor Kwame Kilpatrick in a 2010 mug shot. (Wayne County Jail / Associated Press)
Posted: July 25, 2013

Like Harrisburg before it, Detroit was brought to the brink of bankruptcy by bad government as well as bad breaks.

Kwame Kilpatrick, who could face decades in prison for running a criminal enterprise out of the mayor's office, is only the worst example of the sort of leadership that sped Detroit's plummet from Ford-fueled prosperity to last week's filing for the nation's largest ever municipal bankruptcy. A failure to adjust to dwindling resources ultimately left the city with such unbearable burdens as $3.5 billion in unfunded pension liabilities.

Cities that would avoid Detroit's fate should pay attention. While Philadelphia has enjoyed a downtown renaissance and a more diverse economy than the Motor City's, it has also struggled with some of the same problems. They include a reluctance to adjust its payroll, benefits, and budget to postindustrial realities, as evidenced by a pension fund that has less than half the assets needed to cover more than $9 billion in estimated liabilities.

It's easy for politicians to ignore such long-term problems year after year as they tend to the crises and campaigns of the moment, so Council President Darrell Clarke's insistence on dealing with the city's pension shortfall is remarkable and responsible. And the poor reception it's getting, especially in Harrisburg, is disappointing.

With Gov. Corbett proposing to dedicate an extended 1-percentage-point increase in the city's sales tax to closing the Philadelphia School District's deficit, Clarke made a plea for reserving some of that revenue for pensions. He noted that splitting $120 million in added annual sales-tax revenue between schools and pensions could shore up the retirement system by 2027. His plan probably pleases powerful city unions, but it also addresses an obligation that can't be avoided short of bankruptcy.

Clarke's proposal underscores the fact that Corbett's Krazy-Glue-and-duct-tape response to the schools shortfall offers precious little in recurring state funding. Harrisburg could also help by enabling a $2-a-pack city cigarette tax, which would likely have the additional benefit of reducing smoking rates.

Of course, Clarke's Council could do more, too. It failed to pass Mayor Nutter's proposed increase in the city's by-the-drink tax on alcoholic beverages. And local officials never seem to consider the possibility that the city could save money somewhere else and spend it on the schools. Moreover, the revenue Clarke and Corbett are arguing over is from a tax increase that was supposed to be a temporary response to the recession.

None of that means Corbett should force Philadelphia to be as unserious about its pension problem as Harrisburg has been about the state's - a circumstance Fitch Ratings recently noted in downgrading the commonwealth's debt. A responsible and substantive approach to pension obligations is the way to avoid Detroit's downfall.

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