Is Philadelphia the next Greece?
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Is Philadelphia the next Greece?
Is Philadelphia the next Greece? That's the explosive charge made by Chris Freind, a conservative blogger over at Philadelphia Magazine. According to him, we're just a few short years away from a complete meltdown of the city's pension fund. Freind says the shortfall will lead to riots in the streets when there is no bailout to provide benefits for retired workers.
Pennsylvania, facing a deficit of over $5 billion, is out of the bailout business. And forget the U.S. government, with its $14 trillion debt; under soon-to-be Republican control, it too will be taking a pass.
Hence the riots that inevitably will sweep through the city.
While our men in Blue are honorable, don’t count on them aggressively stopping their retired brothers who received the short end of the stick, especially since current city workers – including police — will have virtually NO retirement benefits coming their way.
The analogy to Greece is cute, but it's also completely incorrect. The city's pension system is certainly underfunded, but it's not going to run out of money in the immediate future. Freind bases his argument on a recent study from Northwestern University that claims Philadelphia's pension fund only has enough money to pay benefits through 2015.
But that study is flawed. The biggest problem with the report -- pointed out repeatedly by Nutter Administration officials -- is that it assumes that city government and municipal employees would make no additional contributions to the pension fund over the next five years. That's completely off-base. Current city workers are required to make payroll deductions to the pension system. The city also includes hundreds of millions in contributions to the pension fund as part of it's annual financial plan.
So that addresses Freind's claim about the pension system being on the verge of bankruptcy. He also makes a broader criticism that the Nutter Administration has done nothing to help Philadelphia's finances recover: He says the only strategy undertaken by local officials has been to raise taxes and increase spending.
Again, that's a gross oversimplification. Yes, Mayor Nutter and City Council have increased the property and sales taxes. But the administration has also undertaken significant cuts to city government, including the elimination of 1,200 positions, reducing the number of pools, decommissioning 5 fire companies, cutting salaries for top employees, and much more. It's simply not accurate to say that nothing has been cut.
Look, we're not saying that the city can't do better, especially with regard to pensions, which are a major fiscal concern. And we can expect a lot more criticism of Mayor Nutter as his re-election fight gets closer. However, the hyperbole offered by Freind isn't fair, or correct.
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"The city also includes hundreds of millions in contributions to the pension fund as part of it's annual financial plan." And how much of that is used in direct pension payments to make up the contribution shortfalls to the fund balance over the last twenty years?— citylumberjack
"...but it's not going to run out of money in the immediate future." Hooray! When will it run out of money, exactly? You really shouldn't criticize another author and claim that he's "completely incorrect" if you aren't going to give us some alternate arithmetic.
Already have riots in the streets....flash mobs. Should be a good prep for the upcoming events.— dogman5
Philadelphian Liberal dont have the b&lls to do what the Greeks did. Entitlements MUST end or the US will become a 3rd world country.- The good news is there will be a list of millionaires who got paid br the DROP program AND a few years of riots will really lower the popluation.— LGbalsac
- "The analogy to Greece is cute, but it's also completely incorrect. "
The authors understanding of finance is lacking. Greece did not run out of money, Greece ran out of the ability to access capital markets. We are a debtor nation, state, and city. So is Greece.
The ability to access the credit markets for the city, which runs a deficit, to contribute to the pension fund, which runs a deficit, is something that no one can predict. That is exactly what happened to Greece, much like Mr. Waxman's belief that the pension funds of Philly are fine, he's correct until he's not, which can happen overnight, or over a decade. Then it's too late.
Are pension problems going to pop up today, no. Will municipal governments fiscal short falls effect credit ratings, which could ultimately effect the ability to borrow money in the credit markets, YES. How and when does that play out, remains to be seen.
Just as snarky as the assertion that we're Greece may be, the ignorance to assume that any analogy is "completely incorrect", is entirely more dangerous.— nolascott - "He also makes a broader criticism that the Nutter Administration has done nothing to help Philadelphia's finances recover: He says the only strategy undertaken by local officials has been to raise taxes and increase spending."
well, really what have more have they done other than mentioned above? 2 major contracts are still unresolved,1 the mayor is appealing so technically 3 are unresovled. And the budgets are not ture because 3 of 4 contracts are unresolved.
Government reinforces failure. Pensions are a legal Ponzi scheme, same as social security. These are warnings that these systems will become fiscally insolvent in a matter of years. Its taught in basic Economics classes.— uandwhosearmy - Mayor Nutter and City Council have increased the property and sales taxes. But the administration has also undertaken significant cuts to city government, including the elimination of 1,200 positions, reducing the number of pools, decommissioning 5 fire companies?
Who is going to vote for this guy?— Nomoredems - The biggest problem with Philadelphia's pension fund system is the assumed 8% growth in it's value year over year. Look at the stock market where has it gone in the last 10 years? No where. So the amount of contribution that the city has to make will balloon without a major restructuring of those benefits. What the city needs to do is freeze the pension system and convert all new employees to defined contribution plans (401k), just like the rest of the citizens of this city (at least those lucky enough to have employment with benefits).— bizzarrophilly
- get rid of the pension system!— bp_
- " But the administration has also undertaken significant cuts to city government, including the elimination of 1,200 positions, reducing the number of pools, decommissioning 5 fire companies?"
I beg to differ, the only positions that were cut are ones that are not filled. Look up the budget in the DN or INKY and you will see new hiring for the next 5 years, they have been hiring and filling new positions constantly since 2008. It is not significant at all. All the talk about cutting vehicles,etc all smoke and mirrors.
— uandwhosearmy - i am from Greece and i Beleave than u.s.a is a powerful Coundry— SANTORINI888
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