Katie Gage

Aptly nicknamed the Motor City, Detroit was once a driving force behind American economic growth. In the first half of the 20th Century, the city had a thriving economy and burgeoning population, largely a function of its powerful automobile manufacturing industry. But after decades of corruption and fiscal irresponsibility, the city is today a shadow of its former self. So much so that the nickname Motor City has become a misnomer. Today, Detroit is predominantly characterized by its high crime rate and distinction of being the largest American city to go bankrupt.

With numerous municipalities teetering on the verge of bankruptcy, some are asking which U.S. city will be the next Detroit, but they need not look too far.

Cincinnati, Ohio, located a mere 250 miles away from Detroit, is presently facing many of the same fiscal issues that brought Detroit to its knees. Like the Motor City, Cincinnati is saddled with woefully underfunded pension funds. The problem has become so severe that Moody’s Investor Services downgraded Cincinnati’s credit rating in July, revising its outlook to negative.

As of early August, the city had $862 million in unfunded liabilities. Cincinnati’s pension plan system is only 61 percent funded; in comparison, actuaries estimate that Detroit’s pensions are underfunded by 40 percent to 50 percent. Seeing as it was Detroit’s underfunded pensions that played a central role in triggering its bankruptcy, one could see how Cincinnati is threatened with a similar fate unless elected leaders can institute meaningful reforms. In fact, Ohio Auditor Dave Yost recently said, “[u]nfunded pension is the monster that is going to eat Cincinnati,” labeling it “[p]ension-zilla.”

To its credit, Cincinnati has been somewhat more receptive to change than Detroit. The city council has already passed legislation to limit the growth of retirees’ pensions, which previously increased by three percent every year, regardless of the economic outlook. And in 2011, Cincinnati firefighters accepted a wage freeze. Yet, these reforms are only a Band-Aid on a hemorrhaging wound.


Katie Gage

Katie Gage is the executive director of the Workforce Fairness institute.