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.