Will the Mayor Take On the Unions?
This week we should see how serious the Mayor of Philadelphia is about cutting costs to save a city mired in financial crisis.
The $80,000-dollar commissioned report on the DROP program is due this week. DROP stands for Deferred Retirement Option Plan. As with many government initiatives, the plan was implemented with good intentions but turned sour with political greed.
We don’t really need a report to tell us that DROP is a perk that needs to be, well, dropped, but it should give Mayor Michael Nutter the political cover to cut the cord. According to those who have seen the report, it will expose the fund as being a costly burden on the city’s pension fund.
DROP started in 1999 during the Rendell administration as a way for city workers to build a bigger nest egg as they neared retirement. Employees who announced their plans to retire could start building pension payments at 4.5% interest over the final four years. This money was over and above their salary.[SIGNUP]
The plan was supposed to save the city money in the long run because employees would lock into their pensions early and at a lower rate.
But that was before the recession. Now the City of Philadelphia’s pension fund is in trouble with less than half the money available to meet future obligations.
For that reason, Mayor John Street tried to get rid of DROP and its $7 million-a-year price tag in 2003. He lost the fight to the city workers’ unions and promptly joined the program the following year. In 2008, when John Street left office, he had a lump sum of $450,000 in addition to his $115,700-a-year pension.
At least John Street really did retire, which brings us to the political greed that has ruined the good intentions of DROP.
There is a loophole in the DROP regulations that allows politicians and high-paid employees to “retire for a day.” They then return to work after collecting a lump sum as high as $500,000. Elected officials “retire” right after they are re-elected and before they are sworn in for another term.
Last year the state legislature passed legislation that stops future office holders from tapping into DROP prematurely; but there are six City Council members currently enrolled in the plan — President Anna C. Verna, Majority Leader Marian B. Tasco, Minority Whip Frank Rizzo, Frank DiCicco, Jack Kelly, and Donna Reed Miller.
Watch to see if any of them really retire.
The report on DROP is being put together by the Center for Retirement Research at Boston College. It is difficult to imagine anything in the report that can erase the stain of abuse or justify the annual cost with an under-funded pension plan.
The Mayor has imposed a new sales tax, new trash fees and is still pushing for a soda tax to bring the budget in order. At one time he proposed closing public libraries and cutting popular city services to fix the city’s finances.
With the increase in taxes and fees and cuts in services, how did the DROP program survive?
In a time of economic uncertainty, when other government leaders have called for salary cuts and freezes, Mayor Nutter has an opportunity to show that he is willing to make the tough choices to bring the city finances in order. It has long been claimed that unions control the Philadelphia Democratic Party and so control the city. This will be a real test to that claim.
If the Mayor is unwilling to take on the unions and fellow city employees in making even this small and obvious cut, he loses all credibility in any future calls for the rest of us to sacrifice.
The Philadelphia newspapers did a wonderful job on reminding us that the report is coming. Forced transparency is what newspapers do best.
And now that we are all watching … Mr. Mayor, it is time to drop DROP.