Sunday, December 28, 2014

Editorial: DROP flunks the math test

AFTER YEARS of rancorous debate and much citizen outrage, the Deferred Retirement Option Plan - which began in 1999 and became a political hand grenade in 2008 after Councilwoman Joan Krajewski retired for a day, collected nearly $300,000, and then went back to work - looks as if it has finally confronted a poison pill it can't dismiss. That pill comes in the form of a string of numbers and letters, and looks like this: PtDB = E1[E1/1(+R)s|tp(q,t)]

Editorial: DROP flunks the math test

AFTER YEARS of rancorous debate and much citizen outrage, the Deferred Retirement Option Plan - which began in 1999 and became a political hand grenade in 2008 after Councilwoman Joan Krajewski retired for a day, collected nearly $300,000, and then went back to work - looks as if it has finally confronted a poison pill it can't dismiss. That pill comes in the form of a string of numbers and letters, and looks like this:

        PtDB = E1[E1/1(+R)s|tp(q,t)]

This is one of the key equations used by researchers at the Center for Retirement Research at Boston College in a report, released yesterday, that accomplished the long-overdue task of measuring just how much DROP has cost us.

DROP fans - namely, those who have entered the program, including six Council members - have maintained that DROP, designed to help the city plan for staffing transitions by pinpointing retirement dates of senior staff in exchange for a special one-time pension benefit, was budget-neutral. Council President Anna Verna, who signed up for the program, responded to criticism by maintaining that it was her money and that it wasn't costing the city anything.

In fact, the program has cost the city $258 million since it began a little over a decade ago, about $22 million a year. The report concludes that "the program imposes a significant cost to the pension plan and the city . . . at no plausible combination is it cost-neutral."

The Nutter administration gets credit for wrestling the DROP question to the ground. But why did it take 10 years to figure this out? A 2003 report on the program had a similar outcome, but was dismissed by detractors. This latest report should end the DROP debate once and for all. The program should be killed.

But it shouldn't stop there. The city should be reviewing departments and programs and subjecting them to the same level of scrutiny, and performing similar and regular cost-benefit analyses on anything that involves public money. Some programs may have high costs, but bigger social benefits; others may turn out to be not worth the money. Without the facts, though, too many public investments are done in the dark. *

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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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