Sunday, December 28, 2014

Legal backing to end DROP

City Solicitor Shelley Smith has given City Council a legal opinion that opens the door for a repeal of the controversial and costly pension perk known as DROP.

Legal backing to end DROP

Council President Anna C. Verna : Report inconclusive.
Council President Anna C. Verna : Report inconclusive.

City Solicitor Shelley Smith has given City Council a legal opinion that opens the door for a repeal of the controversial and costly pension perk known as DROP.

Council has no excuse now that would prevent it from holding hearings and voting on a pending bill to eliminate DROP, or the Deferred Retirement Option Plan.
 

Smith’s opinion says the 1999 legislation that created DROP allows for Council to amend the plan for all employees not already enrolled in the program. Smith added that if city workers challenge a repeal of DROP, it is uncertain how the courts will rule.
 

Somehow, City Council President Anna C. Verna appeared to be confused by Smith’s 13-page opinion. Verna issued a statement saying she was “disappointed” with the legal guidance.
 

“Merely saying that removing DROP participation for most employees ‘could’ be constitutional is of no help at all,” Verna said.
 

It’s unclear what Verna is missing. Smith’s opinion is straightforward. She said Council could end the benefit, and cited legal precedents to support the move.
 

Smith also cautioned that the courts could rule against the city in a challenge, but that’s always the case when you go into court. If anything, Smith provided sound legal advice, and warned there are no slam dunks in court.
 

Any court challenge from the city unions will likely argue that DROP is a pension benefit that can’t be taken away except through negotiations. Indeed, state courts have traditionally provided broad protections to union retirement benefits.
 

But Smith cited two exceptions that could give the city the authority to abolish DROP. Not to mention, the pension benefit wasn’t awarded through collective bargaining. This was a perk that was handed to city employees on a silver platter by then-Mayor Edward G. Rendell.
 

At the time, DROP was touted as revenue-neutral. But a recent study commissioned by Mayor Nutter found that DROP cost the city $258 million over 10 years.
 

Nutter rightly wants to end the program because he says the city can’t afford it. Beyond the cost, DROP provides no substantive benefits to the city.
 

Granted, DROP gives city workers a nice lump-sum payment over and above their annual pension. But that is a perk that taxpayers can’t afford.
 

Verna’s agitation over Smith’s opinion may have more to do with Council’s reluctance to do away with DROP. Seven Council members, including Verna, have enrolled in the program. And they do not want to upset city workers with an election on the horizon.
 

But Council was elected to serve the taxpayers, not the unions. DROP is a perk the taxpayers can’t afford. The mayor wants to end the program. Council should move forward with hearings and vote to end DROP.
 

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