Philly’s DROP program keeps draining the pension fund | Editorial
Even if the Philadelphia pension fund was healthy, DROP would be an outrage.
Philadelphia Councilman Allan Domb wants to stop a drain on the city’s woefully underfunded pension plan. But he is standing against a tide of opposition from his own colleagues and city worker unions.
He introduced a bill in September to stop paying nonunion employees a hefty lump sum under the city’s Deferred Retirement Option Plan (DROP). The plan allows employees to pick a retirement date up to four years in the future, then accumulate pension payments in an interest-bearing account while at the same time earning their salaries. They then collect a lump sum upon retirement along with their pensions.
Since DROP’s inception in 1999, the pension fund has doled out over $1.5 billion in payments. Many argue that they are getting the pension payments they have coming to them, but a 2017 study from the city’s fiscal watchdog, the Pennsylvania Intergovernmental Cooperation Authority, concluded that the program had cost the pension fund about $280 million since its inception in 1999.
Even if the fund was healthy, DROP would be an outrage. But the $11 billion fund is 45 percent short of what it needs to pay retirees.
That shortfall means taxpayers have to make up the difference: $700 million this year alone. That’s money that could support city services, like police and parks.
But Domb can’t even get a hearing on his bill in Council. There’s not a chance to hear experts explain -- once again -- the pros and cons of this giveaway. The bill is drowning in the Committee on Labor and Civil Service, headed by Cherelle L. Parker.
It’s probably understandable that Parker is refusing to hold a hearing. The public hasn’t exactly been supportive of this program, especially after a number of Council members, including Anna Verna, Marian Tasco, Frank DiCicco, Donna Reed Miller, Jack Kelly, and Frank Rizzo Jr. exploited the program and took huge payouts when they left office. Rizzo’s participation cost him his Council seat,
In 2010, Council barred future elected officials from participating in the program – but grandfathered anyone already on the city payroll.
The administration and the unions are pushing Domb to change his DROP bill. Unions are afraid that if Domb kicks nonunion workers out of DROP, the city will go after unionized employees next.
Domb can’t even expect to get any help from the mayor, who campaigned just four years ago on being the lone Council member to stand up to his colleagues against the program. Once he got elected, he agreed in 2016 to settle a lawsuit with the blue-collar union and convert DROP, which had been a sweetener to encourage workers to give advance notice of retirement plans, into a benefit, cemented in a labor contract.
Pundits say it’s unlikely that anything will be done to reform this giveaway, because the entire Council and the mayor are up for election in 2019.
But this is exactly the right time to talk about this fiscal idiocy. All voters, not just city workers, deserve to decide whether to support those who insist on spending money we don’t have.