With his veto of a proposed new version of the costly deferred-retirement program known as DROP, Mayor Nutter kept the original program going. But it was a case of having to save a village now, in order to destroy it later.
The veto means that until DROP dies the city will continue to squander up to $9 million a year on a program that permits city workers and a handful of elected officials to designate an early-retirement date and in return receive a six-figure lump-sum payment in addition to their monthly pension checks.
Philadelphia’s beleaguered taxpayers simply cannot afford the Deferred Retirement Option Plan. It’s a perk that City Controller Alan Butkovitz rightly characterized as “a bonus, as if there’s not a pension crisis.” So, it might appear at first that Nutter missed an opportunity to scale back on the cost of the program.
But the mayor’s long-term strategy makes sense. Nutter’s reasonable hope is that his veto last week will force Council to eventually bow to public opinion and scrap the perk altogether.
What’s more, there was good reason to reject the DROP-lite version that Council had approved by a substantial, 14-3 margin.
Even under the revamped plan, retirement-eligible city workers would still be able to walk off with large lump-sum payments. The revised DROP offered by Council was also unlikely to be used as a management tool to plan for replacing key city personnel. And despite Council’s supposed goal of making the program cost-neutral, cost estimates on the rewritten version ranged from $15 million to $55 million.
There is no room in the city budget for DROP in any form.
The city pension fund has less than half the money it now needs to cover projected pension checks for the city’s 28,000-member workforce. That means the city has to plug the gap by hitting up taxpayers for millions of dollars each year. The annual contribution of $350 million from the city treasury is expected to nearly double over the next several years.
With pension costs soaking up more tax dollars, there will be less to spend on everything from patrolling the city streets to picking up trash and operating city swimming pools.
There are rumblings from the Pennsylvania Intergovernmental Cooperation Authority that DROP could imperil PICA’s required approval of the city’s spending plans. That could trigger a cash-flow crisis and other repercussions.
For their part, city voters have already made clear their outrage by ousting one longtime Council member, Frank Rizzo, who had signed up for the perk. Five other enrolled Council members heeded the political winds and opted not to run again.
But the public’s displeasure didn’t deter Council members who wanted to express their unrelenting fealty to the municipal workers’ unions by pressing to amend DROP, rather than end it.
Nutter’s veto of their bill isn’t the final word, however. With as many as six new Council members expected to take office in January, he must press the new body to make drop-kicking DROP one of its first official acts.