In November, the Detroit Institute of Art came up with a way for the Motor City to keep its beloved collection—which was otherwise going to be auctioned off, piece-meal, in the fallout of the city’s 2013 bankruptcy. Ironically, the only works not up for grabs were Diego Rivera’s Detroit Industry frescoes depicting the city’s boom years: strong, somber, masculine factory workers forging steel, fitting pipes, each mammoth mural espousing the multicultural dream of the unionized proletariat. But it was only the sheer impossibility of the frescoes’ removal—not sentimentality—which would leave them untouched by the creditors who’d been trawling the galleries for months.
The museum had been city-owned for nearly a century, which made most of the 57,604 pieces possible collateral on the road to municipal solvency, along with a massive restructuring of labor union pensions, utility shut-offs, and loans from the state. But before the museum became a part of this “grand bargain”, trustees and citizens organized themselves around battle cries like that of the Committee to Defend the DIA: “The people of Detroit cannot stand by while the financial barbarians loot and pillage this priceless trove of human culture!” The fear was that, among other things, the sales would not ultimately sustain Detroit’s economic independence, and more importantly that, had the museum actually been liquidated it would have instigated a similar draining of civic morale.
By divesting the collection to a series of charitable trusts, the DIA committed to contribute $100 million to the city’s recovery over the next twenty years, and thus the likes of Vincent van Gogh’s 1887 self-portrait, the world-famous Madame Cezanne, and a trove of pre-modern limestone relief carvings, among others, were able to remain, and become part of possibly the most creative solution in American history to a municipal fiscal crisis. As of January 5, the DIA board announced that it had reached that goal in present day value.
Prior to The Great Recession, the most famous municipal fiscal crisis was New York City’s in the 70s—which also had a surprising component to its solution. At the time of its near-default, according to Kim Phillips-Fein from a retrospective in The Nation, “The city had 19 public hospitals in 1975, extensive mass transit and public housing, public daycare and decent schools. The municipal university system—the only one of its kind in the country—provided higher education to all, free of charge. Rent stabilization made it possible for a middle class to inhabit the city. For many, the fiscal crisis showed that it was no longer possible for New York to finance these kinds of services.”
And so it was on a cool, October dawn when the Daily News delivered a famous headline. At the time, President Ford—in an effort to teach the country a lesson about the failures of FDR liberalism—refused the governor’s pleas to save the city from the brink of bankruptcy. And the periodical infamous for its penchant for sensational headlines gave the decision its most memorable spin, with a photograph of Ford, mid-snarl: "FORD TO CITY: DROP DEAD."
But by that point, a very different entity had stepped forward to, at the very least, prevent the city from defaulting on its October 17 deadline: the New York teacher’s union.
Two weeks before the Daily News’ Ford-shaming headline, The United Federation of Teachers had voted, at the eleventh hour, to scrape $150 million from their pension fund to begin to pay off the $453 million debt. The saving of the city, in this respect, was initiated by public school teachers, who of course were only the first part of a much more complex exit from fiscal crisis, but whose pensions put some pressure on federal and state governments to follow suit: Ford did eventually come through with a $2.3 billion government backed loan—despite his ideological commitments.
Today, the top two primary sources of municipal debt are “current employee salaries and benefits [and] retired employee pensions and benefits,” according to Peter Conti-Brown, a bankruptcy scholar at the Stanford Law School. Though there’s always been, of course, those more idiosyncratic instances like that of Orange County’s in 1994 when then-treasurer Bob Citron made heinous speculative investments based on interest rates predicted by a mail-order psychic and astrologer. And the tiny town of Moffett, Oklahoma which, in 2007, when ordered to shut down a speed trap on Route 64, almost immediately defaulted (its only other source of revenue was a salvage yard, which couldn’t support the two shiny new police cruisers they’d recently procured for the aforementioned lucrative ticketing scheme).