PHILADELPHIANS HAVE LEARNED through bitter experience to expect less and less of their city government. Year after year, more services are cut than expanded. Libraries are subjected to commonplace “emergency closings” due to staff shortages. Mechanical leaf collection is gone; street repaving and pothole repairs are completed on slower schedules. Even for that much, we pay more. Three years running, planned tax cuts have been scotched, and rates were raised on other levies, like property, parking and sales taxes. Increasingly, Philadelphia has a government that demands more from its citizens even as it gives them less.
What’s to blame? The causes are complex, and include everything from generational poverty and white flight to the Great Recession. But more than anything else, it’s Philadelphia’s dull, maddeningly complex and immutable pension system that has sapped the strength of city government. There is no single greater drain on the city’s capacity—to fight crime, to fund education, to clean the streets or to cut taxes—than pensions.
Philadelphia’s pension fund—the $4.7 billion pot that writes pension checks for retirees—has only half as much money as it needs to be self-sustaining. That’s a dangerously low funding level, one of the worst in the nation. Left on its own, the fund would be insolvent by 2015. But the city won’t—and legally can’t—let that happen, so it writes massive checks each year to cover the pension benefits the fund can’t.
This year and next, Philadelphia will spend 18 percent of its total budget paying for pensions. Those payments—$630 million this year, $660 million next year—are non-negotiable. (The state constitution forbids cities from shorting pensioners.) And they are devastating for a city with so many other needs.
Let’s start with tax relief. With $630 million, the onerous city wage and net profits tax could be cut in half. Or you could eliminate the business privilege and city sales taxes altogether. Either option would, overnight, make Philadelphia—long regarded as one of the most hostile business locales in the nation—financially competitive with any city in America. That means jobs, and in the long run, the sort of prosperity that has eluded Philadelphia for more than 50 years.
Perhaps you think it would be wiser to invest the money in city services. With $630 million, the city could just about double the departmental budgets for the police, the Free Library and Parks and Recreation. Imagine: more cops per capita than any big city in the nation; a library system to rival those of ultra-educated cities like Seattle and San Francisco; a Fairmount Park to be proud of, every bit the equal of Golden Gate or Central Park.
Another option: Increase spending on capital projects by a factor of five. Stop babbling about redeveloping the Delaware waterfront and just do it. Those comparisons likening the Ben Franklin Parkway to the Champs-Élysées are embarrassing, but $630 million (in one year alone) sure would narrow the gap.
But because of the pension problem, such investments are utterly out of reach. “We can’t do any of it as long as we have these obligations that essentially strangle us,” says City Councilman and mayoral aspirant Bill Green.
If the failures of the past are any indication, Philadelphia won’t be able to escape its fate. Not because there aren’t solutions, but because to date, the system has proved unable to enact them. Union workers could start contributing more to the fund. New city employees could be steered into 401(k)-type plans. Limits could be placed on the egregiously generous pension benefits for elected officials. City Council could kill DROP, the costly pension perk that so outraged the public last year. Bigger fixes, which would have a more immediate impact, include selling off core city infrastructure—like the Gas Works and the Water Department—and putting the proceeds into the pension fund.
None of the solutions are easy. Each is fraught with political risk and loaded with very real consequences. The alternative, though, is to limp along indefinitely, a diminished city, in hock to the past.