An empty house is seen with the GM Building in...

An empty house is seen with the GM Building in downtown Detroit in the background. (March 3, 2013) Credit: EPA

How and if Detroit pulls itself out of bankruptcy is important to the rest of the country because, if successful, Detroit will be the template for rescuing other U.S. cities teetering on the edge of insolvency.

This year the Pew Research Center released a survey that showed 61 of the nation's largest cities had $217 billion in unfunded pension and health-care liabilities; in other words, they don't have the money on hand to pay for those liabilities when they come due.

In the current climate, it's unlikely that the federal government will come to their rescue, although some kind of federal assistance ultimately may be inevitable. And most states, even if they wanted to, are in no position to help and, indeed, some of them have critical fiscal problems of their own. Pew estimates that state pension plans were underfunded by $1.4 trillion in 2010.

To oversimplify, many cities made a devil's bargain with their municipal employees: Instead of healthy raises that would have to be paid for immediately, they promised benefits down the road -- such as early retirement, extensive medical benefits and generous pensions. The problem of how to pay for all this was left to a changing cast of elected politicians.

Detroit's problem was exacerbated by the massive downsizing of its principal industry, auto-making, and the vast network of suppliers that supported it. Meanwhile, its most solvent citizens were fleeing to the suburbs.

What the city was left with is daunting. The population of what was once the nation's third-largest city fell from 1.8 million to about 700,000, ranking it 18th, just ahead of El Paso, Texas, according to the U.S. Census Bureau.

That population faces a cumulative long-term debt as high as $20 billion and a current budget shortfall of $300 million. The dwindling population plus 10,000 active public workers are supporting 18,000 retirees, whose pension obligations are underfunded by about $3.5 billion and health care by $5.7 billion.

Maybe Kevyn Orr, the turnaround artist installed as Detroit's emergency manager and whose decision it was to file for bankruptcy, can work some kind of fiscal magic. And even bankruptcy may be only a measure to buy time.

As the Detroit Free Press points out, political decisions, like restructuring city government, are outside the court's purview: "And debt might be wiped away, but the underlying issues of things like poor governance and management, or of a shrinking population and tax base, won't be."

Until now, municipal bankruptcies have been relatively rare -- Stockton and San Bernardino, Calif., being recent exceptions. But Detroit Mayor David Bing, who not surprisingly will not seek a second term, insists that more than 100 major cities are struggling with problems like Detroit's. "We may be one of the first ... but we absolutely will not be the last," he said. And, alas, he's almost certainly right.

Dale McFeatters is a nationally syndicated columnist.

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