Tuesday, July 29, 2014
Inquirer Daily News

Editorial: DROP: Benefit for a few, costs for the rest of us

A FUNNY THING HAPPENED following Mayor Nutter's news conference calling for the elimination of the Deferred Retirement Option Plan (DROP). It turns out that the biggest fans of the controversial program are not, in fact, the City Council members who have signed up for the program and stubbornly resisted taking action to eliminate it - for which they have been roundly (and deservedly) demonized.

Editorial: DROP: Benefit for a few, costs for the rest of us

Union bigs (left) Bill Gault, firefighters, and John McNesby, FOP, hear Nutter urge end to DROP.
Union bigs (left) Bill Gault, firefighters, and John McNesby, FOP, hear Nutter urge end to DROP. ELIZABETH ROBERTSON / Staff photographer

A FUNNY THING HAPPENED following Mayor Nutter's news conference calling for the elimination of the Deferred Retirement Option Plan (DROP). It turns out that the biggest fans of the controversial program are not, in fact, the City Council members who have signed up for the program and stubbornly resisted taking action to eliminate it - for which they have been roundly (and deservedly) demonized.

The biggest fans of DROP, which, a new study says, costs the city $22 million a year, are the city's unions. Three of the four unions began howling on Monday when Mayor Nutter called for eliminating the program. All four unions have since issued a letter questioning the study. According to them, the study that found that DROP has cost the city $258 million over the last 10 years is "flawed."

Some of their arguments: First, academics can be pressured to say anything, especially by a mayor eager to go after DROP. Second, the report is very technical and complicated, and therefore can't be used by mere mortals to make public policy. And, third, the program, designed as a management tool for the city, has, over the years, become a benefit that members shouldn't be expected to give up.

For the record, the research was done by the Center for Retirement Research at Boston College. Respected academics found that DROP - which allows city workers to accumulate pension payments in an interest-bearing account for up to four years before retirement - was anything but a cost-neutral management tool.

The unions are lobbying City Council to preserve DROP over the coming weeks . . . and lobbying very effectively. In the 24 hours following the report's release, Council members, including President Anna Verna, cautioned that they needed more time to "study" the report, and thought the program was too important to kill without more thinking.

Does this mean they're still studying a similar report from 2003 that also found that the program cost the city?

Here's another funny thing: We weren't aware that there were that many Council members with advanced mathematical degrees that are in a position to refute the equations in the report.

But we did manage to find independent evidence that the program has a price tag that was not anticipated when the program began. It's in a letter posted on the Web site of the Fraternal Order of Police. Union president John McNesby promised his members that he'd "vehemently fight to keep this benefit."

That language tells you everything you need to know - that DROP isn't a revenue-neutral management tool, but has enough monetary value to be considered a benefit.

That's particularly problematic because unlike other benefits - wage increases, health care, and pensions- DROP was never negotiated by municipal workers and the city. Instead, DROP originated through legislation to be a tool to help manage the city work force, especially for departments that were losing aging workers with a lot of experience. That's clearly not what happened, as DROP has become a an extra payday for city workers of all stripes.

We don't begrudge the unions for fighting to keep DROP; it's their job to fight for their members. But it's the lawmakers' and policy makers' job to fight for the rest of us.

DROP is bad for taxpayers and the city, however you do the math.

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Every year, city government spends slightly more than $4 billion. Where does all that money come from? More importantly, where does it go? Are we getting the most bang for our tax buck? “It's Our Money” is a joint project between Philadelphia Daily News and WHYY, funded by the William Penn Foundation, designed to answer these questions.

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