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As Council tinkers, DROP is mutating

A new loophole could drain more city funds.

Philadelphia's resourceful public officials - the same people who gave us DROP - have devised new ways to loot the city's already-depleted pension fund.

DROP, the subject of City Council hearings scheduled for today, is the great municipal giveaway that allows retiring city employees to collect their salaries and pensions for up to four final years on the job, with the pension money paid out in the form of lump-sum bonuses when they retire. Since 1999, when Council unanimously adopted DROP (which stands for Deferred Retirement Option Plan), 10,265 city employees have collected or signed up to collect a total of $1.3 billion in cash bonuses, at an average of $126,618 each.

While the vast majority of those who signed up for DROP agreed to walk out the door within four years, a new loophole is allowing more city employees to circumvent that requirement. The city pension board is letting municipal employees hop on the DROP gravy train and lock in the program's four years of generous benefits even though they don't plan to retire for another five to ten years. Call it the preregistration option.

Meanwhile, not to be outdone, City Council has introduced a new giveaway for future retirees that will further bleed the pension fund. This new perk is contained in what's been advertised as Council's DROP reform bill.

Welcome to Philadelphia, where government officials can take a program that's already a disaster and tinker with it until it's even worse. nolead begins

Here are a couple of examples of what's been going on at the city pension board: Police Sgt. Joanne M. Beres, 48, signed up for DROP in March, locking in a $179,708 bonus even though she's not planning to retire until 2021. And Fire Capt. Stephen C. Neri, 56, signed up for the program in February, locking in a $309,451 bonus even though he's not planning to retire until 2018.

Beres and Neri are among 102 employees - most of them police officers and firefighters - who have been allowed to preregister for DROP benefits well ahead of time.

Pension board officials explained that workers eligible for DROP have always had the option of signing up now for future benefits. But few took advantage of it until October 2010, when the city solicitor issued an opinion on the subject. nolead begins

Official blessing

When people at City Hall want to bend the rules, they tend to go to the solicitor. That's how we ended up with the retire-for-a-day option for elected and appointed officials, which has allowed Council members and others to collect massive bonuses without actually leaving the city's employ. It only took a couple of solicitor's opinions to get around the ostensibly "irrevocable" decision to retire that was required of anybody who entered DROP.

Sure enough, when asked about the now-popular preregistration option, City Solicitor Shelley R. Smith opined that anyone who enters DROP "is not subject to any current limit on how far into the future the member may choose as his or her DROP entry date."

It apparently didn't matter to Smith that the city's official DROP brochure says, "You must retire ... within four years from your DROP enrollment date." And: "Once again, your retirement date must be within four years from your DROP participation date."

Nor did it seem to matter that 99 percent of the 8,745 people who signed up for DROP over the previous 12 years had spent no more than four years in the program. And the 1 percent who exceeded that time frame did so only by a matter of months, according to the pension board.

So now the city has a separate class of 102 beneficiaries who don't plan to retire for another five to ten years. With the Council pressing ahead with plans to reform DROP and a mayor who says he wants to kill the program, that number is sure to grow as panic spreads among city workers. (Since Feb. 1, 2010, 1,520 employees have enrolled in DROP, at a cost of $247 million in future bonuses.)

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Meanwhile, as part of a reform bill that's supposed to make DROP cost-neutral, City Council has inexplicably proposed a new giveaway.

Council's legislation would create a new perk for employees who don't sign up for DROP, allowing them to collect up to three full years of pension benefits when they retire in exchange for corresponding reductions in their monthly pension benefits. Council has heralded this new perk as "completely cost-neutral to the city and the pension fund."

It may be cost-neutral, but it's certainly not cash-neutral. And cash is what's in short supply in the pension fund, which has nearly $9 billion in debts against only $3.4 billion in assets.

Philadelphia also seems to be short of cash to fund its public schools, libraries, and fire companies these days. But it does have plenty of greedy public-employee unions - and plenty of irresponsible public officials who think their primary duty is to serve those unions instead of the taxpayers.