Since Philadelphia taxpayers will have to cough up $1.7 billion over the next three years to plug a massive shortfall in the city’s pension system, this is no time for City Council to drag its feet on a proposal from Mayor Nutter to trim pension costs.
On Monday, though, a Council committee sidestepped Nutter’s plan to revamp retirement benefits with a lower-cost hybrid pension scheme for about 5,000 city workers not represented by unions.
On the same day, the panel did approve a similar plan for the Police Department. The difference is that those pension benefits were dictated by an arbitrator in awarding Fraternal Order of Police members a generous five-year contract in December, so Council approval was more of a formality.
Nutter is under a legal mandate to put the pension plan on a firmer financial footing. One of his plans is to cover nonunion workers with a less costly 401(k)-type pension. That makes sense, even if it’s short of the full-fledged pension reform that’s necessary to head off the growing pension shortfall.
The new retirement option would be voluntary and apply only to newly hired employees, but at least the city could see some savings. Employees who opted for the 401(k) would receive a city match for their own contributions. If they stayed in the city’s current pension plan, new workers would make higher employee contributions as a means of trimming the cost to taxpayers.
It’s also vital that Nutter negotiate similar pension benefits for the city’s other unionized workers.
While Councilman Bill Green’s committee punted on the pension proposal, he argues that it was premature to move ahead for nonunion employees and that the reforms don’t go far enough.
As the author of some of the best ideas for streamlining City Hall, Green has the right idea to push for broader reform. He was justly critical of Nutter’s decision not to appeal the unaffordable police contract, noting that real pension reform would mandate new workers enroll in a hybrid plan, along with other cost-saving changes.
But implementing a 401(k) plan for nonunion workers would be a good first step, and Council could always tweak the plan down the road to incorporate Green’s bolder reform proposals.
Inaction merely worsens the looming pension crisis.