Council must show Harrisburg it is mending its ways

By Larry Farnese

As state Senate and House leaders try to hammer out a budget in Harrisburg, the city of Philadelphia is mired in a budget crisis of its own. To address an estimated $700 million shortfall over the next five years, City Council and Mayor Nutter have agreed on a plan to balance Philadelphia's budget by raising the city's sales tax to 8 percent and deferring more than $200 million of the city's pension funding.

Under state law, both of these measures need the approval of the state legislature. I joined other Philadelphia lawmakers to back legislation in Harrisburg that would allow Council and the mayor to implement their plan to keep the city afloat. Bills have been introduced in the House and Senate, and the House passed its version last week.

Now City Council members can help us finish the job by showing that they're prepared to be reform-minded and fiscally disciplined.

As I work with my colleagues to fight for the legislation that Philadelphia needs in the Senate, it is not enough that those of us elected to represent the city agree that it needs help. Getting this legislation passed will require the support of legislators from across the state and in both parties. Many lawmakers in Harrisburg are not sufficiently convinced of Philadelphia's plight, especially given that they are still struggling to close a $3 billion gap in the state budget.

During this recession, belt-tightening has become the order of the day at many levels. In the state budget, many programs face potentially devastating funding cuts: education, arts and culture, health and welfare, and economic development are all on the chopping block.

Thousands of state employees have received only partial pay for weeks. Across-the-board cuts in legislative spending also have been proposed. I and nearly 100 other legislators voluntarily returned automatic cost-of-living adjustments in December.

In Philadelphia, meanwhile, the mayor announced the possible elimination of nearly 3,000 jobs, as well as severe cutbacks in core city services.

City Council must join in the effort and demonstrate that it, too, will share in the sacrifice. One way we can carry the message to Harrisburg that Philadelphia is serious about its own fiscal crisis is for Council to bar elected officials from future participation in the DROP program.

DROP, or the Deferred Retirement Option Plan, was originally conceived in the 1990s as a management tool to help control the departure of key city employees. As an incentive to keep employees working beyond their retirement dates, city workers entering DROP not only receive their normal salary, but also begin receiving the pension payments they would have received if they had retired.

The pension payments go into a special tax-deferred account with a guaranteed 4.5 percent rate of return. This account is paid to the employee in a lump sum when the employee retires, which he or she must do within four years of entering the DROP program.

DROP never should have been applied to elected officials, such as members of City Council, as it is today in several cases. And DROP is not entirely revenue-neutral, as some have claimed. Workers who are already at the top of their pay scale continue to earn that pay while simultaneously receiving pension payments. Also, if a special DROP account cannot earn 4.5 percent returns - which is likely to be the case in this economy - then the city must make up the shortfall.

Finally, elected officials, unlike rank-and-file workers, have been allowed to "retire for a day" after four years and then return to the city payroll - after getting a lump-sum payout from a DROP account.

Difficult times require painful decisions, but they also provide great opportunities for reform. City Council and the mayor have asked me and my colleagues in the General Assembly to take up the fight for Philadelphia. Steadfastly clinging to a benefit that was never intended for Council sends the wrong message as we carry out that fight.

City Council has a unique opportunity to embrace both reform and our efforts in Harrisburg by getting rid of DROP. It is an opportunity that should not be missed.