As city waits, Harrisburg debates big pension reforms

With the city's budget in limbo, state senators this morning used a hearing on a Philadelphia fiscal relief bill to explore potential statewide pension reforms, including changes that would, if enacted, usurp local control over Philadelphia's pension fund and public employee retirement benefits.

Ostensibly, the hearing was about Philadelphia's request to state lawmakers that the city be permitted to increase its sales tax from seven percent to eight percent, and to restructure and delay pension plan payments. Without those measures, Mayor Nutter has said he would be forced to cut $700 million from the city's budget over the next five years, requiring thousands of layoffs and sharp service reductions.

But while city officials would like nothing better than for Harrisburg to approve those requests quickly and with little debate, the State Senate is instead using the legislation as an opportunity to explore far more comprehensive pension reforms.

For instance, one amendment under consideration would require municipal pension funds statewide that dip below a 50 percent funding level - a marker Philadelphia is dangerously close to - to hand over control to a state entity that would have the authority to both tell cities how much they must pay into the pension fund each year and to set retirement benefits without negotiating with municipal labor unions.

Despite ongoing Nutter administration attempts to address Philadelphia's long-standing pension problems, Republican leaders in the Senate appear increasingly convinced that change will only come if the state requires it.

"The city does need and is pursuing comprehensive pension reform," Finance Director Rob Dubow said at the hearing, ticking off a host of changes the city is looking to make to retirement benefits and pension funding.

The trouble, the senators said, is that Nutter does not have the authority to make those changes on his own.All of them - from a provision that would eliminate elected officials participation in the controversial DROP retirement program to reduced retirement benefits to city workers - require City Council legislation or collective bargaining agreements or arbitration decisions that favor the mayor's position.

"Many of us are leery that these any of those actions are ever going to be taken because they haven't been taken in the past," said Sen. Jane Earll (R., Erie) at the hearing.

Why not, she wondered, make the city's relief legislation - the sales tax and reduced pension payments - contingent on City Council approval of pension reforms?

The short answer is local control, Dubow replied. The administration prefers to pursue reforms itself through negotiations with Council and in arbitration and collective bargaining negotiations with the city's four labor unions.

State Sen. Patrick M. Browne (R., Lehigh), who as chair of the Finance Committee is guiding the legislation, said yesterday that amendments to the bill could be ready by the end of the week.

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