Philanthropy to the Rescue in Another Struggling City, This Time in Connecticut

Connecticut may be the wealthiest state in the nation, but you wouldn't know that by visiting its capital, Hartford. The city is in the middle of a financial and psychological slump. Hartford has some of the starkest inequality of any major metro area in the U.S., with a third of residents living in poverty not far from ultra-wealthy communities. More immediately, Hartford's fiscal problems have lately reached a crisis level, as more than half of the city's property is non-taxable, and the tax base is much smaller than many suburbs. The result is a serious structural problem.

Of course, Hartford is also famously the home of top U.S. insurance companies, which are based in towers downtown and rake in vast profits. These corporations have often been criticized for not doing enough to help local residents, and so it was big news when three major insurers—Aetna, The Hartford, and Travelers—announced that they would come to the city’s aid with a $50 million collective commitment. All three of these companies have maintained a big presence in Hartford for over 100 years and have established structures for corporate philanthropy, but this is the first time they've come together in such a big and unified way.

In turn, this is the latest of several big local philanthropic efforts to help distressed cities in recent years. The bailout of Detroit is the most well-known of these, but funders have also stepped forward with emergency support in Flint and Kalamazoo, both in Michigan. As well, foundations and major donors have helped beleaguered school districts in several cities, responding to pleas from public officials looking to close budgetary shortfalls.

These efforts have drawn controversy on several counts. First, some worry about philanthropic dollars funding basic services that government should pay for, diverting grant money from the risk-taking and leveraged giving that historically has been philanthropy's greatest added value. Second, when funders increase their roles in cities, they also may increase their influence, raising questions about the role of private wealth in guiding public policy. A third concern is that philanthropic bailouts of poorly run cities can serve to paper over problems that need to be faced more squarely. One critic of the insurance companies' gift, Chris Powell, called them "enablers" and wrote, "Instead of showering millions on incompetence, they should have threatened to move if state and city government don’t quickly start pursuing the public interest instead of the usual special interests."

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On the other hand, it's hard to argue against a greater sense of civic responsibility on the part of corporations and wealthy citizens—especially amid rising concerns that privileged segments of society are pulling away from everyone else. And Connecticut is definitely one place where new efforts are needed to close this growing gap.

Here’s how this commitment will play out in Hartford. The insurance companies will collectively commit $10 million to the city each year for the next five years. It’s not been publicly clarified yet whether that $10 million will be evenly split among the three insurers. The focus of these funds will be on big institutions in town, at least at first. This includes the public library, local law enforcement, and recreation centers around town. However, the exact details on how money will be disbursed are still in the works.

The $50 million pledge has created a glimmer of hope in a city where bad news has lately been the norm. Connecticut Senator Len Fasano said, “This city is not dead. We can revive it, but we all have to be willing to pitch in. We need the local legislators to pitch in.”

The he insurance company funders reasoned that making their $50 million grant public will attract other funders to chip in, as well. They’re really looking to draw support from other private funders to jumpstart efforts to fix the city budget.

According to the Hartford Courant, the city has a $17.3 million budget shortfall that could very well expand to about $45 million in year ahead. The paper points out that this is “more than four times the size of the annual contribution by the three insurance companies.”

Philanthropy to bail out cities raises some legitimate concerns. But the alternatives can be more alarming. After all, the strength of Hartford contributes to the overall strength of the state of Connecticut. The powers that be can't just sit back and watch the city go broke.

(Learn more about the insurance companies’ corporate giving strategies here: Aetna Philanthropy, Travelers Philanthropy, and The Hartford Philanthropy.)