How much federal money already goes to Detroit?
— Gregory Phillips (@Ancient_Warrior) August 1, 2013
Members of the House of Representatives are trying to gather support from other members of Congress to hold hearings on a federal fund to help Detroit through its bankruptcy.
As I have been saying for months, the likelihood of a federal bailout for Detroit is miniscule. Federal spending, excluding transfer payments like Social Security, Medicare and Medicaid, has been shrinking as a percentage of the U.S. GDP. The federal government’s discretionary spending is contracting. Moreover, it is difficult to find the political will to rebuild Detroit. Federal money is spent on sudden, massive disasters like Hurricane Sandy, not on a slow crash like Detroit.
The likelihood of a federal bailout for Detroit is small to none, but there is a discussion about the funds that the federal government sends to Detroit on an annual basis. This has been a form of life support for the city. The question is how much Detroit already receives from the federal government.
President Barack Obama proposed giving Colombia about $323 million in aid next year, mostly to combat drug trafficking and violence. Detroit, with an 81 percent higher homicide rate, will get $108.2 million.
It’s an interesting comparison, but after studying Detroit’s financials, this number looked odd to me. Here are Detroit’s revenues from its 2012 Comprehensive Annual Financial Report (CAFR) page 47. Detroit received $253 million of federal funds last year. The “General Fund” (the main house account of the city) received $61 million, and “Other Governmental Funds” received $192 million. This would be about 16 percent of the $1.5 billion of total city revenues.
Detroit is already getting significant federal funds. It’s very important that Detroit get a better handle on its use of federal money. That alone could provide a boost to the city. Especially since the likelihood of additional federal money is low.
Chart: Federal Reserve Bank of St. Louis