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Beware of the Philly pension blob

Philadelphia's pension crisis, as Finance Director Rob Dubow has noted, is unfolding like the plot of the science fiction classic The Blob. The movie's menace started as a small, gelatinous lump found outside Phoenixville. The more it ate, the bigger it got, until it threatened to engulf the entire town.

Philadelphia's pension crisis, as Finance Director Rob Dubow has noted, is unfolding like the plot of the science fiction classic The Blob. The movie's menace started as a small, gelatinous lump found outside Phoenixville. The more it ate, the bigger it got, until it threatened to engulf the entire town.

The city pension fund's ravenous appetite has more than doubled in 15 years. It now devours 15 percent of Philadelphia's general fund. That's money that won't be spent on services like caring for abused children or staffing libraries.

This fiscal year, city taxpayers are expected to feed $612 million to pensions, which is a little less than the Police Department's budget. It's expected to be even more expensive next year.

Making matters worse, as The Inquirer's Claudia Vargas reported recently, the fund's assets performed so poorly last year that it lost $220 million of its value - roughly enough to run the city's prisons. That would be significant even if the pension fund were healthy, but it isn't: It has only 46 percent of what it needs to meet its projected obligations.

The fund is so troubled that the city's fiscal oversight board publicly called on officials to deal with it last week. And since City Council rejected a 2014 offer for the Philadelphia Gas Works, which would have significantly reduced the pension problem, other, more painful solutions must be pursued quickly.

Outside of better investment returns or asking taxpayers for even more, city workers will have to be a major source of additional funds. They will have to understand that although it is grossly unfair to ask them to pay for promises that irresponsible politicians made but couldn't keep, stabilizing the fund benefits workers as well as taxpayers. Changes to future benefits also have to be considered.

Lesser but nonetheless significant savings can come from cutting excesses. The notorious DROP (Deferred Retirement Option Plan) program allows city workers to take a lump-sum payout upon retirement with four years' notice. So far, it has paid $1.2 billion to more than 10,000 workers since 1999. DROP has been particularly abused by politicians, some of whom have "retired" for a day to take the cash. City Council members responded to controversy over the program in 2010 by keeping the benefit for themselves but banning it for anyone elected later. The city should abolish the perk entirely.

Another bonus program, sponsored by Mayor Kenney when he was on Council, has paid out $62 million to retirees over the past year and should be retired itself.

When the townsfolk in The Blob finally decided to take the threat seriously, the creature had already eaten several people and wrapped its pulsating, slimy mass around a diner. The destructive power of Philadelphia's pension problem has become about as obvious. The limited options left to shrink it will test the new mayor's relationship with the labor community that helped elect him as well as his seriousness as a steward of the city's fiscal health. If it's not addressed at this critical moment, the pension fund's hunger for money will swallow Philadelphia's momentum.