The city of Detroit filed for bankruptcy on Friday, making it the largest city in the United States to do so.
A number of factors led to the city’s current fiscal hole, including outsized pension obligations, a shrinking population, and high unemployment. The state appointed an emergency financial manager in March to address the situation but city officials have since determined bankruptcy to be the only viable path forward.
Detroit is not alone; 13 other cities and local governments have filed for bankruptcy since the 2008 financial crisis. According to the Federal Reserve, the total debt of state and local governments is nearly $3 trillion. An analysis by Boston College in 2012 also found that local governments are liable for roughly $1 trillion more in pension liabilities than they have assets to pay for.
External links:Boston College Report on Funding of State and Local PensionsUSA Today: Detroit Not Alone