Saturday, August 1, 2015

Want to make DROP simple? Take a look at Anna Verna's case

The Daily News doesn't think there was anything lacking in the City Solicitor's opinion on DROP, and that maybe Council President Anna Verna's objection to it wasn't really about how much "guidance" it offers:

Want to make DROP simple? Take a look at Anna Verna's case

0 comments

The Daily News doesn't think there was anything lacking in the City Solicitor's opinion on DROP, and that maybe Council President Anna Verna's objection to it wasn't really about how much "guidance" it offers:

On Monday, City Solicitor Shelley Smith issued a 13-page opinion on how successful Council might be on killing the DROP program. Here's the short version of her opinion on five categories of employees:

_ For employees eligible for but not yet enrolled in the Deferred Retirement Option Plan: A court could determine without a constitutional violation that DROP can be repealed.

_ Employees vested in the pension system but not yet eligible for DROP: The plan can be repealed.

_ Employees not yet vested in the retirement system: There is no impediment to repealing DROP.

_ Union employees: A court could determine that the city may utilize a common-law exception to repeal DROP.

_ Employees already enrolled in DROP: This is the only category that would pose a problem for the repeal of DROP. That makes sense.

As for the rest, it's good news that the city's legal expert is seeing potential success in killing DROP. But Council President Anna Verna issued a harsh statement blasting the solicitor's letter, saying "it provides far less guidance than any opinion I can recall."

We are confused by Verna's response. It either means she expected the solicitor to provide a guarantee of how the court would decide - which even we know is impossible - or Verna is unhappy hearing that a repeal of DROP would likely be successful.

The truth is, Verna's own participation in DROP makes any other explanation hard to imagine. Her office says she wanted more definitive advice on whether to proceed.

A study commissioned by the mayor and done by Boston College researchers in the summer concluded that the program costs the city $22 million a year. But that, apparently wasn't definitive enough, either. Council has hired its own expert to review the numbers in that report. And it wants to hold public hearings, too.

We share Verna's desire to make DROP simple. In our own attempts to simplify the program, we looked more closely at one case: Anna Verna's.

Verna entered DROP in 2008. She began getting her pension payments ($130,000 a year) paid to a special account that guarantees a 4.5 percent rate of return, and continued collecting her salary of $148,000.

In 2012, her DROP payment will be $584,777, a figure that incidentally represents $64,777 above what four year's of pension payments would yield. If she retires then-by no means a sure thing-she goes on to collect her pension.

Here's our simple view: If DROP did not exist, the city wouldn't be paying out $584,777. Multiply a similar figure by the number of people in DROP (not all of them would have a pension or salary of her size) and the only question that remains is: Who ever thought this program was a good idea?

It is true that Verna could have retired much earlier, and been getting pension payments all along, but the fact is, those pension payments would have been significantly lower, since they are based on earnings. If we were doing a deep analysis of alternate scenarios, they would have to be mathematically calculated.

But here's the simplest idea of all: Logical and moral calculations are enough to convince us this program has to go. And that elected officials in particular have no business participating in it. (Unlike elected officials, retiring nonelected employees can be replaced at much lower salaries, which is one of the assumptions that DROP proponents make in justifying the program. )

Verna wants more definitive guidance on dropping DROP? Here it is: Proceed, with all due haste.

Follow us on Twitter and review city services on our sister site, City Howl.

0 comments
We encourage respectful comments but reserve the right to delete anything that doesn't contribute to an engaging dialogue.
Help us moderate this thread by flagging comments that violate our guidelines.

Comment policy:

Philly.com comments are intended to be civil, friendly conversations. Please treat other participants with respect and in a way that you would want to be treated. You are responsible for what you say. And please, stay on topic. If you see an objectionable post, please report it to us using the "Report Abuse" option.

Please note that comments are monitored by Philly.com staff. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable. Personal attacks, especially on other participants, are not permitted. We reserve the right to permanently block any user who violates these terms and conditions.

Additionally comments that are long, have multiple paragraph breaks, include code, or include hyperlinks may not be posted.

Read 0 comments
 
comments powered by Disqus
About this blog
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.

It's Our Money contributors

Tips? Comments? Questions?
Contact:

Holly Otterbein:
215-854-5809
hm.otterbein@gmail.com
@hollyotterbein

It's Our Money
Also on Philly.com
letter icon Newsletter